| |
Commodity Market Alerts
Be alert to aggressive commodity brokers who may try to
"load up" a new client quickly in an attempt to "lock
in" their capital. This means putting all your money
into the commodity market right away. This tactic is
sometimes used when buying options. Options can create a
false sense of hope and safety. They claim there is
plenty of time for a move since commodity options can
have several months before expiration. Yes, lots of
expensive time to sit and hope and wait. But if the
futures market goes nowhere for a few months, the client
is shocked to find his capital has not remained intact,
but rather has eroded severely.
Commodity Market Trading Alerts
If the commodity broker fears his own poor trading
record, it is easier to make full use of the client’s
capital by loading him right in the beginning. In
contrast, when committing to trades slowly and holding
cash in reserve, a client is more apt to close his
account if part of it erodes, before much damage is
done. So, you can see the incentive for a commodity
broker with a poor trading record to try to put most of
the money into the market quickly. It’s sad, really. I
have no problem with poor trading. There are times when
I can’t trade out of a wet paper bag. We all have our
bad times. But what bothers me is putting too much money
at risk with an all-or-nothing attitude. Just be alert
to this. It's YOUR money at risk.
Commodity Market Money Management Alerts
Money management is important no matter what style of
commodity trading. Risking less than 10% on any one
trade is the key to survival. Less than 5% is even
better if you have the account equity. I am not saying
that futures contracts are better than commodity
options. I am saying buying way out-of the-money, far
out in time commodity futures options can make us lazy
in our market entries and risk analysis. Just look at
the monthly chart of your favorite commodity and notice
how often the market will chop nowhere for six months at
a time.
|
|
|
|
|
