The Six Sure-Fire Ways that to Fail Trading Commodities, PART 1
Over 27 years of commodity futures and choices trading, I've seen a variety of commodity traders implode. However it did not have to happen. The correct knowledge and rules may have saved them. My own initial year of commodity trading back in 1979 was rough and is documented in another series of articles known as, "My Early Days as a Novice Trader - Trading Blunders I, I I, III and IV."
How little we have a tendency to know after we 1st begin out! We think we can apply everyday business ways to commodity futures trading. I've tried and revealed how frustrating that may be. We have a tendency to think as a result of we tend to are good at some other endeavor it will carry over to commodity trading - wrong! In fact, thinking that means makes us even a lot of stubborn and arrogant, setting us up for the big body slam. Let's have a look at six commodity trading debacles. I will describe these real life trading stories that truly happened and then make suggestions on how these events may have been prevented. Some are funny and some are sad.
The Six Certain-Fireplace Ways to Fail Trading Commodities:
1) Get a scenario into your head of what MUST happen.
This one could be a killer. How many times have I sat patiently listening to a different commodity trader spilling his guts - frothing at the mouth about how bullish or bearish a market is? He's loaded up with as much as he will buy. It's like he's trying to convince the planet to induce on board before it's too late. I extremely believe these traders mean well and wish to help their friends to make cash too. It's a guy-hero thing. After I hear the same old spiel, I suppose to myself, "man, this guy is dead."
Sometimes there is nothing I can do or say after they get like that. It's sometimes because of a commodity newsletter they browse, a book, a market guru, or something else that gets them going. If I ask regarding using stop loss orders just in case they are wrong, I typically get the response, " Oh, the market will not go that low because....(fill within the blank) however if it will, I will purchase a lot of!" Or, "If I exploit stops, THEY can simply take my position away at the lows and rally it while not me - I KNOW I am right!" Curiously, the majority of these folks are bullish. They are rarely bearish, though there's a massive camp of doom and gloomers who have been shorting the bull stock market for the last fifteen years or so. There can come a time when even they can be right.
Anyway, here's what happened. A private friend of mine got nuts about the Y2K thing in the fall of 1999. He got hooked on what the commodity "gold bugs" were saying concerning gold. They warned it could skyrocket as the whole world's pc infrastructure failed. You remember the scene, I'm sure. This guy would decision me on the phone describing how much more of his retirement fund he just switched into gold. I kept suggesting he use stops, but he used my warnings to argue even stronger, thinking I wasn't convinced enough.
As a fitting epitaph, gold created its long-term decline to its $250-$275/ozmajor low between the 1997-2001 period! This action was fully opposite of the news. Yes, there was a rally before the Y2K January mark, however short lived as viewed on a major scale. My buddy sat through the entire decline, staying steadfastly bullish.
Near the tip of 1999, one thing happened that still makes me laugh today. Back in those days there have been a variety of "pirate" radio stations on a number of the dead areas within the international shortwave broadcast bands. One night my buddy fired up his massive homemade radio transmitter and did a pirate radio talk show regarding Y2K and gold! He went on the air for many nights like an evangelist preacher insisting how gold MUST move up as a result of of the turmoil to come back in 2000! He was trying to save lots of his commodity trade by preaching to the world on the shortwave! However the planet wasn't listening.
Gold eventually took its toll on his retirement account. He later told me in 2001 he sold out at the lows and took a staggering loss. In fact, once the gold market shook out those Y2K state of affairs traders, it rallied for five years to highs not seen in a very number of decades.
SOLUTION: Got a commodity trading state of affairs? That's OK - some situations turn out right. However use stops and be versatile enough to change your mind early in the sport if your situation doesn't work out as planned. It's as easy as that.
Part Two of Seven Components - Next!
There's substantial risk of loss trading futures and options and could not be appropriate for all varieties of investors. Only risk capital should be used.
Author Resource:
aaron adish has been writing articles online for nearly 2 years now. Not only does this author specialize in Investing, you can also check out latest website about
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