WHY I PLAY COMMODITIES
Trading commodities has been going on since before the time of the first written words. Humans have always wanted to trade what they have for what someone else has. This has lead to more and more specialization and has produced prosperity. I'm not looking to give a history lesson though, just want you all to know this is an ancient market and lessons learned 5000 yrs. ago still apply. Afterall, we still talked about candlesticks on our charts, right? Of course they are from trading commodities haha!!
They way I see it (and some of you know since I've been preaching it so long!) is that commodities are the future! For the foreseeable future several years out (or more) commodities should present the best opportunity for profits IMO. Repeating myself.... more and more folks with more and more income wanting more and more things and better foods/housing/transportation etc; more and more folks leaving rural areas around the world and going urban will need more housing and more food (less gardens/self sufficiency's) and more and more clothes. If you also throw in some changing weather patterns and a declining dollar (which many goods are trading in - though this should change sooner-than-later IMO) you should get a picture of big increases in demand and, at best, a slight increase in supply but IMO it will be a diminished supply of some.
The mrkts themselves for commodities will only keep growing IMO because of access to them is increasing rapidly around the world. We have seen this happen to stocks already, and a natural progression is in order to commodities. This is especially true this very day, as many folks who have been trading stocks are flocking in to the historic move in silver. This trend will only grow over time, and we are witnessing it today on Ihub! As those that have followed ALL THINGS MONEY for any amount of time, know that I preach "Know your market and market participants!" With the new flood of folks world wide joining the commodities water you know I will be swimming there, munching away haha!
The futures mrkt is one that can be VERY lucrative, seeing 5% changes in a mrkt per day is somewhat common. With many folks leveraged, this can be a big winner or a huge looser quickly! It is not for the faint of heart! Jumping in without first paper-trading will most likely lead to a bad result. I also like trading here as I can get a large amount of money working for me - as opposed to many stock options or small priced stocks. Combined with large returns, and the optimistic view I have towards the future increases, it is only natural that I spend effort in this arena.
Additionally, I believe that trading here leads me to be better at stocks, since I can see input prices to manufactures, gain better understanding of shippers/warehouse's etc. It gives me a broader base to do my other trading. It also keeps me on my toes in regards to political developments, population distributions....I could go on and on!
HOW I TRADE COMMODITIES
As I continually mention, what is good for me may well be terrible for you! Everyone should find their own way and never stop fine-tuning it! All of us have very different circumstances and as such, we should all trade to fit what is best for us as an individual.
While I did start trading commodities based solely on charts, and continue to do some over the past year strictly off of TA, my main strategy now is to trade more on fundamentals. I, however, try to take that to an extreme. I am constantly checking weather forecasts and my own weather model to identify possible plays. I check into where hybrid seeds are being planted and resistance to disease. I check political situations that may affect something - as recently seen in the cocoa mrkt. To make a long story short...I work my tail off to find any possible advantage - whether it is a lack of frogs in Thailand to vacant orange groves in Florida left over from the comm. building collapse to African elections to the Brazil drought to.....I hope you get the picture haha! Never ending research - but ooohh boy can it pay off hugely when your cocoa goes up day after day after day. Of course TA still plays a part to this style of trading, but it is the research and asking my favorite question "what will this lead to and how can I make money off of it" that pays off big!
If I were to give any advice to someone starting out here, it would be to make certain you will survive to play another day - take loss's quickly! This mrkt can wipe you out fast!
The variety of things we can trade just keeps growing and growing, and this too will continue.
Like I have discussed on my board, just like stocks can have "pattern plays", so do many commodities. Many have mirror markets, time delay movement, form certain repeating chart patterns.....many different little tricks to grab that 5% tomorrow - again, hard work, time and research. And for those who have seen my trades know, I often enter a bit early and build my position, which is exactly opposite of what may be best for you. I also start to exit early as I may hold a large number of contracts and need to secure profit. Just giving you yet another reminder that just because I may be buyin Nov rice now doesn't mean it may be a good trade for you - I may just be building a position early. I generally, if I post a trade, say if it is a flip or not.
There is much to learn here, and caution is recommended as there are sharks swimming these waters!!!
Remember, if it can't be harvested from nature, then it is farmed or mined - just look around your home/office/dinner plate...it can through a commodities market first.
Much more to say on the subject, but that was a bunch to type with 2 fingers haha!
Be back in a while!!!
