Commodity Trading Involves High Risk With High Reward

Commodity trading is the buying and selling of contracts of items that we use everyday. It is the trading of primary or raw products. Some of the items traded in the commodities market include such common, everyday items as: soy beans, cotton, orange juice, cocoa, sugar, wheat, corn, barley, pork bellies, milk, feedstuffs, fruits, vegetables, other grains, other beans, hay, other livestock, meats, poultry, and eggs. Energy items that are traded on the commodity markets include oil, natural gas, electricity, and gasoline. The commodity speculators in the energy market were blamed for the recent price increase in the cost of gasoline at the pump.

Buying and selling commodities is very similar to buying stocks and bonds on the stock market but with much more risk. Since it is much more volatile, commodity trading is very speculative, involves a high degree of risk, and is designed only for sophisticated investors who are able to bear the loss of more than their entire investment. It is not for the investor with a weak stomach! However, commodity trading is a battle between return and risk. Because of the leverage involved, you can achieve a higher rate of return than from most other forms of investment, but at a higher risk.

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Commodities trade on different markets than typical stocks. For example, most people are familiar with NASDAQ or NYSE (New York Stock Exchange) for trading stocks and bonds. But commodities are traded on the world market. A few of these places are the Chicago Board of Trade (CBOT), the New York Board of Trade (NYBOT) (these two exchanges trade much of the grain and agricultural commodities), the Chicago Mercantile Exchange (for livestock and meat), the New York Mercantile Exchange (NYMEX) for energy, and the London Metal Exchange for precious metals like gold and silver.

Since it is so risky and speculative, many investors shy away from investing in commodities. However, it can be a very lucrative way to make money if you have the stomach for its wild ups and downs.

Commodity Trading Involves High Risk With High Reward

Commodity Futures Trading Using Fuzzy Logic and Market Synchronization Clues, PART 2

There's nothing better than fuzzy logic for determining when a commodity market has begun a new trend and is starting to synchronize. Read on to find out exactly what this is all about...

Observation From Trading Notes:

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"After an e-mini futures top forms over 1-2 days with big contracts and multiple tops, look for the last rally to labor up all day AFTER a sharp and fast down opening with poor A-D line. Key: It will spike or touch the 5 min chart channel one last time. This is the best place to short."

This is another familiar e-mini futures pattern. In this case it's a big set up for a big move. There are always some kind of preparations for a big move. Your job is to identify them. These are patterns that will repeat every 5-10 days or so. The anemic rally is the key. It's like the market is running out of gas and getting tired. That last stretch to tap the channel in a weakened state is an e-mini short trade you should jump on. It is a "high probability" trade.

If you stalk this trade, focused and patient, you will find your share of these kinds of set ups. Notice they are not rigid, computer system type patterns. Making sense of them requires the fuzzy logic of the brain that is looking at many indications and patterns at once. You will get to the point where you can simply feel you've been there before in a general way and know that this means a short sale.

There's no computer program that can do the same integration at this time. There will be someday, but for now the extraordinary commodity futures traders, the superstars who earn $millions+ a year, are mostly discretionary (fuzzy logic) people using computers to do the raw number crunching - the grunt work.

Good Trading!

There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.

Commodity Futures Trading Using Fuzzy Logic and Market Synchronization Clues, PART 2

Commodity Trading - Trading Oil

Traditionally, commodity trading in petroleum products was a place where only the elite, super traders dared to venture. With barrels holding 42 gallons each and a contract minimum of 1,000 barrels, delivering oil was a task best left to the professionals. However, the petroleum trading landscape has undergone some dramatic changes over recent years.

For decades oil prices were stable, then in the mid 1970s the industry exploded. Technological advances and the political landscape contributed to the uncertainty, lack of stability, shortages and rising prices. Nearly 30 years later, prices have skyrocket to more than per barrel and the forecasters predict that in mid to late 2007 when it is expected to experience a slight decline for the next two years.

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However, there are no certainties when it comes to oil prices, but there are a few large scale factors that can minimize the risk by offering a reasonably accurate projection.

As demands continue to rise, other countries like India and China are also experiencing technological and cultural changes. The trend seems to be in an upswing with no indication of slowing, reversing or of being reversible.

India is riding in on the coattails of its western neighbors in regards to technology and business methods and is emerging in the 21st century. This brings with it an increased demand for energy, mainly oil based, so that homes, office buildings and manufacturing plants can be erected. Rural economy is getting a facelift in many areas as this movement brings with it such exponential growth which, in turn, increases the demand.

Demand is not the only piece of the puzzle, though. As India's purchasing power to obtain those goods increases, other growth is showing up as well. India has a wealth of inexpensive, highly educated work force which is being sought out for outsourcing of Information Technology, electronics manufacturing, communications and more. This is continued to grow and expand for at least another decade. One indication of this growth is the rapid growth of broadband throughout India.

China is a technological mega country with the largest mobile phone use in the world and a close second for the largest internet population. Energy is in demand throughout the world, but in China it is expected to rise steadily for at least the next decade.

Although China is perceived to be a Communist nation, social forces are causing it effectiveness to decline. As of yet, it is impossible to predict whether the repression will increase or decrease, but it is inevitable that the flow of information will not be stopped and it will reach the people one way or another, despite any government's attempts to block it.

The social changes within China seem to be somewhat proportionate to the increase in business there. Demand for energy is on the rise and new infrastructure, buildings and manufacturing plants are cropping up on a consistent basis. These businesses and growth all require energy, mainly oil based energy.

Demand continues to rise yet simultaneously supply rates are dropping off or have stalled. Temporary losses, such as with refineries, that occur as the result of disasters may be recovered in a matter of months, up to a year. However, North Sea oil production, which saw its peak in 2000, has seen a gradual decline. Until the time that political changes come around, releasing the massive reserves that are known to be in Alaska, it is not expected that there will be new discoveries of sources that will be utilized. Not many new sources are expected to be realized throughout the globe.

As technology leans in the direction of developing new forms of energy, there is no expectation that any of these sources will appear on the market for a period in excess of ten years. Fuel cell powered cars, which only account for 7% of gasoline use, are not expected to make an appearance for quite a few years.

Existing political pressures in the United States are hindering any hope of a change in the current situation. Waste disposal is one of the primary problems on the political forefront that shows no promise of a solution anytime soon. However, there are new forms of oil trading mechanisms that are evolving that allow the average investor to partake in a market that was at one time exclusive.

For example, e-mini futures on the CME allow for trading contracts that are half the traditional size of 500 barrels. Futures and options on the NYMEX remain at the 1,000 barrel size, yet they require less that 5% investment. These moves place these trades within the grasp of all types of investors. Commodities pools and funds such as those that are offered by Pimco and Oppenheimer allow investing lower amounts which are increasing their popularity.

This time in the marketplace can offer even the average investor a favorable risk and reward balance in oil commodity trading.

Commodity Trading - Trading Oil

Commodity Day Trading - 3 Essential Tips For Commodity Day Trading

With the current volatility and market uncertainty in equities, many people have been looking to commodity day trading for their investment needs. Before you start commodity day trading, I have some helpful tips to relate to you that should be looked at in close detail.

1. Establish a Well-Funded Account: This is one of the MOST overlooked aspects of commodity day trading. Studies in the past have shown the more money you have on hand in your trading account, the more chance of success you will have.

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Why is this? You need to have a well-funded account when trading because you have to be able to have a margin for error. Not every trade you make will be a winner; you will have losers. In commodity day trading, what matters is limiting your losers and letting the winners run.

2. DO NOT Over-Leverage Your Account: Many people who want to begin commodity day trading will start to look into the lowest margins they can get, specifically for the e-mini stock indices. Some places may be able to give you day trading margins as low as 0.00. It's fine to use this day trading margin, but DO NOT overdue it.

If you are starting trading with a ,000.00 account size and are using a 0.00 day trading margin, do not look to use up every penny in your account and trade 9 or 10 contracts at once. This is suicide, and most likely, your account will go into debit fairly soon.

As a general rule of thumb of using leverage in trading, I NEVER recommend using more than 20% of your account equity toward one trade, in the case that would be 2 contracts at a time.

3. Trading the Commodity Markets IS NOT a Get Rich Quick Scheme: In fact, there is no such thing as a "get rich quick scheme" in any industry (besides the lottery of course, but then again, try making a career out of that...). When trading is practiced in good principle, you can experience good returns.

You have to realize that you are trading the markets in a short-term time frame. The shorter the time frame in commodity day trading, the higher amount of volatility you will experience. The higher the volatility there is in the marketplace, the higher the risk you take on and the higher the potential reward you are aiming for.

Trading is a practice that should be exercised only when exhibiting great discipline. These 3 rules will get your mentality started in the right direction, but there is much more to learn in order to become a well-rounded day trader.

Commodity Day Trading - 3 Essential Tips For Commodity Day Trading

Commodity Futures Trading - why it was not for the average investor

If you do not mind losing $ 5,000 in 10 minutes, you can enjoy the commodity futures trading. There's an old saying among commodity traders: "It 'just a small fortune in commodities make it easy to start with a large fortune." This is not a business for people who are emotionally, are connected to their money, but thousands of average "investors" in commodities markets for years to get baits years. Why? Because of the possibility of high percentage gains with the built-in leverthat both the Commodity Futures Traders.

The commodity markets are wheat, corn, soybeans, pork bellies, gold, silver, oil, wood and many other items of common commercial policy. Large companies operating in these markets use commodity "futures" contracts to lock the selling prices of products before delivery. This approach is called "hedging". On the other side of the transaction, the merchant speculates that if the goods are pricedup or down before the contract for delivery. Since contracts can be purchased with leverage, these financial instruments lend themselves to speculation.

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For example, the control of a contract of corn, valued at $ 5000 only $ 500 of real money requrie or 10% of the nominal value of the contract. If the grain goes in value, and the contract has a value, say, $ 5,500, the speculator has made $ 500 on his back the original $ 500 for a 100%. Comparison with the stock regularMarket, leverage limits of 50%, so that requires $ 5000 shares worth at least $ 2,500 in capital. If the stock rises to $ 5,500 in value, is to win the $ 500 against $ 2,500 invested, for a return of "only" 20%. The return is 100% sure a lot better, right?

One can easily see why investors are looking for quick profits hypnotized by the lure of big profits with the highest trading commodity futures. The real problem is that leverage works bothDIRECTIONS. It is possible the entire investment in a few minutes through the turns wild price that sometimes occur in these volatile markets to lose. Suppose that the contract is $ 5,000 to $ 4,000 in value instead of increasing. They have not only the original $ 500 you have lost the contract in place, but an additional $ 500. You can quickly go broke in this way.

So why do people play this game? Investors do not mean to wake up and say, "Okay, I think I start tradingRaw materials. "What happens is they get a sales pitch from a commodity trading" gurus "who claim a" system "to create an infallible wild profits in this market. These" systems "in price from $ 25 to $ 5,000 or more and are based on the promise of "huge profits" from selling a small initial investment.

Writers newsletter or commodity gurus regularly pitch the myth of turning $ 5,000 into a million dollars in less than a year. The typical commodity systemBad luck comes in a long sales letter or brochure that describes a method for the extraction of "9 out of 10" or similar trades inflated.

Of course, if it were possible to trade successfully for 90% of the time, a person could easily raise millions of dollars in a very short period of time. Because these people are so anxious for you to spend $ 195 on their super-duper trading course? Because you probably do not make money with their trading program! And 'much safer to make moneySales of other, on the concept of the Commodity Futures Trading.

There is no sure way to make money consistently in these markets, simply because the underlying commodity prices can fluctuate wildly back and forth depending on a complex set of variables, many of which are completely unpredictable. Therefore, only the money people are constantly in the commodity markets, the broker to collect a commission, regardless of the execution of the operation if they have won or lost. Sinceare also a handful of successful professionals who live in these markets. But the vast majority of people who dabble in commodity futures lose money.

Unfortunately, with the lure of big returns and easy money, enter into a fresh culture of innocent traders market each year, only to be fleeced of their money in a hurry. Do not be one of them! Let the professionals at Commodity Futures Trading and keep up with the tedious forms of investment such as mutual fundsor stocks and bonds.

Commodity Futures Trading - why it was not for the average investor

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