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Commodity Gold Market
We've all read the same stuff about commodity trading
money management...about how we should only risk 5-10%
of our account one any single trading idea, etc. Much of
the trading folklore is false, but this one idea is the
truth.
Gold Trading Commodities:
During the last 2006 gold commodity market run up, I
sometimes chatted with commodity futures brokers about
the anonymous results of their clients who traded their
own accounts. No names, just results. There was one
commodity futures and option trader who stood out. He
was right about the gold market. He hated buying way
out-of-the-money inflated options on futures (for good
reason) and stayed with futures contracts only.
Commodity Gold Market Prices
He was a brave soul who had about $100,000 to work with
and held maybe 5 futures contracts for the long haul. As
gold futures market moved from the $500/oz area toward
$650, he was making a good score. I was proud hearing of
his ability to sit through the corrections and add more
on the dips. He was up to about 12 futures market
contracts. His protective stops were down maybe 25 full
points away from the action. His stops were safe at the
time because the volatility was mild. His was a textbook
campaign so far.
Then came the day when the gold futures gold market took
its first sharp dip and stopped him out. He made about
$60,000 on the trade, but was angry he got stopped out.
The gold market took off again to the upside. He lost
his discipline and started buying breakouts. Gold
futures contracts went into a nasty chopping range for a
month as he bought futures most days and got stopped out
for losses.
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