futures

[ccwhoelse?]

i'm an ignoramus so bear with me.

i just wanted to know a good way to start learning about commodities trading and really get in to the stuff.

[Ray Zee]

go to any library and start reading everything printed. thats how you learn any thing. after that maybe you will realize that you will go broke in that market. try somewhere else. like the crap table. its a better bet for someone not on the inside which i assume you will not be.

[Wildbill]

Agreed, futures are a terrible place to play. Stocks and options at least get a lot of amateur gamblers, but futures pits almost never have anything but at least studied players involved. Add to that futures are all big-time leverage and you will see that you would be a fool to get involved until you have really conquered trading easier markets filled with a lot less "smart" money bankrolled in the millions by investment bankers.

[Timer]

[ QUOTE ]
i'm an ignoramus so bear with me.

i just wanted to know a good way to start learning about commodities trading and really get in to the stuff.

[/ QUOTE ]

http://www.ltg-trading.com/index.html

http://www.ltg-trading.com/archives.htm

[Lexander]

My last job was writing software for Risk Management. A lot of this dealt with futures, options and swaps.

Vastly simplified, all three of these transactions are just a situation where one party agrees to assume the risk for another party. There is a LOT more to it than that, but the basic reason they exist in the first place is to provide this service. One side takes the chance to make a lot of money while the other side typically gives up a chance to make money in exchange for a specific profit. However, in practice you can use these financial tools to simply gamble.

The thing about this type of market is that these markets exists primarily to reduce the danger to the company producing the commodity. That involves putting all the risk on YOU.

The 'big boys' can compete in this market because they are basically providing a type of insurance (which in the end is the primary purpose of most options in the first place). The people with the commodity compete in this market because they are just trying to guarantee a consistent price.

You don't want to have anything to do with this in most cases. You are competing against opponents who tend to have every advantage.

- Lex

[joedot]

Are you speaking from your personal experiences in the commodities markets Ray?

[Ray Zee]

i have little commodities experience. although i have read and somewhat understand what is going on. but i have friends on the inside so i speak from my lips their words.

[MMMMMM]

I lost some money in the 80's in futures options. Since then I've regarded it as a fascinating subject but not something to mess around with. That said, I suppose if you were able to identify a very strong situation with ALL of the following criteria: 1) strong fundamentals, 2) good technicals, and 3) a catalyst such as a news event--then you might be able to get on the right side of a move. But even that should be a small play IMO if a non-professional is taking a shot at it. BTW I read those 3 criteria in an interview in Market Wizards many years ago and the guy was saying if you can truly meet all those 3 criteria on a play you almost cannot lose. Also if you are right your trade should show positive results almost immediately. The thing is that such situations are pretty darn rare I would imagine.

[RollaJ]

An interesting book on the futures markets is "The New Gatsbys" it is fascinating. You can make a ton of money or lose a ton very fast.....Just think had you bought some soy beans 4 months ago /images/graemlins/tongue.gif

[EASYALEX]

i went broke trading futures about 10 years ago.now i am t ready to get back into it after 10 years of playing poker for living and saving for my stake to trade futures.
i am sure all of you know how tough it is to make money playing poker for living,but with my experience in both fields i definetely say that trading futures for living is much,much tougher...i had everything going for me-nice bankroll,two winning trading systems but lack of discipline(read money management)did me in.
my mechanical systems are "tight" they come up with a play only every 2-3 weeks and i could not resist and start day trading and went broke.
anyway you need at least one mechanical system,adeqate bankroll and money management-the most important.
good luck alex

[joedot]

If you are interested in comodities, in particular metals, I would recommend a very good website. www.kitco.com. (http://www.kitco.com.) The best I've found in regards to metals trading.

[crazy canuck]

its a better bet for someone not on the inside which i assume you will not be.

Two things I can think of that benefits institional traders: Lower brokerage fees and the also they see the order flow of different instruments...from the order flow they can see short term supply and demand. And not to mention institutions own research and risk management groups.

However, if you still want to trade futures your best bet is the currencies market. There are still tecnical strategies that are profitable becasue there are many participants whose main purpose is not profit but elimination of some risk.

[GuitarMarc]

They're not as rare as you think. These situations happen all the time. Trading commodities is much less complicated than playing texas hold'em. It's just a question of being right and having good money management. But it's definitely not complicated. Futures are not more dangerous than stocks if you don't misuse the leverage they offer.

[Brian Mitchell]

I'd disagree with you there -- you make or lose money as rapidly as you want to. Leverage is the key -- just because you can use 40:1 leverage (or in forex, 200:1 -- ouch!) does not mean you should. Define your risk up front via a stop, and when it's hit, you're out. Sure, there's a possibility of a gap through your stop, but risk management will usually save your bacon.

Also keep in mind that you choose how much leverage to make use of. If you want lower volatility, use lower leverage by keeping a larger portion of your portfolio in cash. Don't think of the cost as the margin, but think of it as the total contract cost.

I've got a little futures exposure (using trend following, as I do with stocks). Risk management is the key. Personally, I think the hardest to trade futures are the s&ps (they dont trend too well in my experience) and the easiest are the currencies.

I still do better with stocks though, but it's helpful to have noncorrelated asset exposure to smooth out your equity curve.