An old commodity broker friend who was only half joking once told me that if you are thinking that it is a good idea to trade commodity futures you should have a nice glass of wine, go to bed, and take a long nap until the urge has disappeared. For most people who want to jump into the frenzied world of commodity trading that would be good advice.
However, for those who take the time to learn as much as they can about the commodity trading business before trading real money there is the possibility of starting out with a small amount of risk capital and trading it up into a sizable fortune. It is important to realize that you will be competing with some very smart, well informed individuals who will be pleased to take your money.
With that said it is also important to know that you will never have complete information about any market and that the outcome of any commodity trade can not be known for sure in advance. While it is important to know what you are doing you must be able to operate knowing that you will never know everything. If you are unable to pull the trading trigger when your trading system indicates a favorable trade is offered you had best give up commodity trading right now. Even tiny delays in executing trades can be fatal to your results.
You might be lucky for a little while trading against aggressive seasoned commodity traders but probably your luck will soon turn into financial grief. So beware. Don’t be in too big of a hurry to start trading before you at least have put together a trading plan and have decided how much capital you are willing to put at risk.
There is another very important item that you must decide upon before starting to trade commodity futures. You must choose a commodity brokerage firm. You may also wish to select a commodity broker although these Internet days you may decide to trade online in a self directed account using a trading platform provided by your brokerage firm. You must do your homework to insure that the brokerage firm that you are dealing with is not running a scam.
The Commodity Futures Trading Commission (CFTC) offers guidelines to help you with your home work. A few guidelines follow. Before opening an account you should visit the CFTC website. The CFTC will not assist you to make winning trades but they can help you with your commodity trading education which may very well help to get you started in the right way.
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Things to look out for from the CFTC:
Foreign Currency Trading (Forex):
* Foreign currency trading scams often attract customers through advertisements in local newspapers, radio promotions, or on attractive Internet sites. These advertisements may peddle high-return, low-risk investment opportunities in foreign currency trading, or even highly-paid currency-trading employment opportunities. Precious metals scams often work the same way.
* The CFTC urges you to be skeptical when promoters of foreign currency trading claim that their services or account management will earn high profits with minimal risks, or that employment as a currency trader will make you wealthy quickly.
Take a look at the CFTC’s brochure on forex fraud available in PDF or in HTML.
Commodity Pool Operators:
* Commodity pool operators often solicit investments from friends, neighbors, co-workers, and fellow religious or social group members by using their reputations in the community or their personal relationships. In many cases, however, these investment schemes turn out to be fraudulent, and you can lose your entire investment, in many cases as a result of outright theft.
* Individuals and firms that fraudulently solicit funds from investors for commodity futures and options trading are usually not registered with the CFTC. They may operate “Ponzi” schemes in which little or none of the money sent in by investors is ever invested as promised in the commodity markets. Instead, the operator of the scam steals the funds, and creates the illusion of a successful business by using some of the money put in by later investors to pay phony “profits” to earlier investors. This tactic makes it appear to investors that the investment is actually making money, which in turn attracts additional investors. Be wary of such payouts if you do not fully understand their source.
Introducing Brokers:
* Introducing brokers often use advertisements and infomercials on radio and television to promote commodity futures and options. These advertisements may claim that seasonal trends in the demand for certain commodities or well-known current events (such as a hurricane or a terror attack) create an opportunity to make big money by trading in commodity futures and options. They promise quick riches, like turning $5,000 into $20,000 in just a few months, with little risk.
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When you trade commodity futures you want to make every effort to at least start out on a fair and level playing field. Selecting an experienced and reliable commodity brokerage firm is critical to your trading success.
February 4th, 2009 at 4:28 am
do you have any tips of commodity trading?
April 17th, 2009 at 5:02 am
Hi I m Nishant gupta.
You have really done a great job regarding this site.
Keep it up.
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