How To Become a Commodity Trader
and Start Making Money Fast!
Welcome to our Knowledge is Power Traders Guide, providing free information to get you on the road to success today using commodity traders trading knowledge of commodity trading, trading methods and futures commodity systems!
I’ll say it again. Commodities are at once both the safest investment and the riskiest trading vehicle in the world! Let’s talk investment once more Where else can you own a highly leveraged and instantly liquid investment for nothing? One that is completely safe because it can never go bankrupt be "de listed" or become worthless. (You can buy cheaply enough to handle a draw down and maybe buy some more, can’t you? After all, any draw down is the amount of your Actual Investment.) You say I’ve forgotten Margin? Not so. That’s in your T-Bill earning what your "sweep" account earns for you stock market traders. Except for one thing. That money is no longer in that sweep account after you buy your stocks.
Being as I am, when I decided to do commodity trading 17-years ago, on the way to the library I stopped and bought the only commodity book my local bookstore had. Pretty basic stuff, but the first lesson was to buy an historically cheap (also relative to my account size) corn contract putting up $540 and adding money only if my commodity broker called. The rule was to take profit when it equaled my total maximum outlay (including margin). That would equal or exceed a 100% return on my money (exceed if my broker did call) even if it took two years of roll overs! The lesson really was, as long as you’re a buyer, true commodities will always eventually return to a profitable futures price.
Now tell me that 99% of us can’t figure that out. Don’t 99% of us only think we’re in it for the money? Isn’t the money the excuse to challenge ourselves to "beat the odds"? Maybe human ego, not a little greed and what the Catholic Church called the sin of presumption when I was a kid? (Not surprisingly the author of above book included 2 mechanical commodity trading systems that he proves made him money. Then he says, "A strange thing happened. I lost interest in the trading methods. I had proven them and that was that). What a shock! We have met the enemy and it's us!"
For those of you who actively trade (or desire to learn how to trade) the financial and futures markets, there are a lot of other things outside the markets you should be following. But, I guess my bigger message is for those of you that aren’t in the futures markets, whether you trade them or not, the futures markets have a significant impact on what happens in the other financial markets, including forex, currencies, options and stocks. That’s why you should soak up every piece of good trading knowledge like a sponge in a quest to clearly see the bigger picture.
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Timing With Fibonacci
Want a basic way to forecast future tops and bottoms? Try using Fibonacci ratios. The most popular ratios to use are .618 and 1.618. Several software packages have these ratios included as part of their tool set, and for good reason. For whatever the underlying cause, whether it is natural laws of the market or a self-fulfilled prophecy as some may conclude, using these ratios can help you find market turns. What you do with those turns are up to you.
Simply locate two concurrent tops or bottoms. Make sure they are no mere blips on the screen, but clearly trend changes. Count the number of price bars on your commodity price charts measuring from one top or bottom to the other top or bottom. Okay, you have the distance in time from two extremes, now let’s forecast out into the future.
Let’s assume you are going to use the last two tops. Say the distance between them is 20-days. Take this distance (20), and multiply it by both .618 and 1.618, adding the result to second of the two extremes. Rounding for this article, .618 of 20 is around 12. Therefore, count 12-days from the second top or bottom of the two extremes you're using to arrive at your forecasted turning date.
How valuable is this commodity trading information? Years ago, I was getting beaten up pretty good by market action. The Stochastic, moving averages, etc. were not helping. Then I came upon Fibonacci ratios and their applications, and from there went on a wonderful long streak of wins in Pork Bellies by forecasting exactly when the market would turn. All my debts were quickly wiped out and soon I was in the black by several thousands. This was the beginning of my commodity trading career.
Today, I don’t use Fibonacci time days as they are too far apart, and further study and experimentation has brought me to market geometry, which although Fibonacci no doubt is in there somewhere, it makes up only a small part of the whole equation. That is how Fdates was born early 1997. But the fact remains you can still use your hand calculator to get some time days, and you can learn to properly use the information for profit.
Once you solve for a time day, simply wait to see if you will have an opportunity to use it. So pull out your calculator and try a few charts using these ratios. Soon you will find it easy to do. What I mean by this is that, even if you have a time day, there are other factors you should keep in mind. One of those is trading with the trend, not against it, and where to enter price-wise. These are lessons for another day. by Rick Ratchford