Commodity Futures Trader

Posts Tagged ‘mutual funds’

Futures trading is one of the ways to make money and grow your wealth overtime. Many people only invest in stocks. However, trading futures contracts like copper, wheat, corn, coffee, soybeans, pork bellies, cattle, crude oil, gold, ethanol, heating, gasoline, silver, interest rates, currencies and others can be highly lucrative.

If you want to profit from commodities than futures trading is the best and direct method of getting access to the commodity market. There are several active futures trading exchanges in the US. Three of the world’s largest futures exchanges are located in Chicago.

Futures trading is no doubt risky but if you learn it, it can be highly profitable. As said before, Ricard Dennis and his turtles used to trade the most liquid contracts in the market. The number one is the CME ( Chicago Mercantile Exchange). The futures contracts that get traded on CME include among others stock index futures, foreign currencies, interest rates, commodities, environmental futures and others.

The commodities futures that get traded on CME include cattle, butter, limber, pork bellies, Goldman Sachs Commodities Index, live cattle, milk, lean hogs, feeder and fertilizer. Now as said before, commodities is an important asset class. CME provides you with the opportunity to trade many commodity contracts.

Major stock index futures contracts like the S&P 500, S&P 500 Midcap, S&P Small Cap 600, NASDAQ Composite, NASDAQ 100, Russell 2000 and their corresponding E-Mini contracts also get traded on CME.

Trend is your friend. But how do you know it is really your friend. Trend can only be your friend if you know that the trend is going to continue or it is about to reverse ahead. Otherwize, trend trading is going to give you a loss. Candlestick patterns can help you anticipate whether a trend is going to continue or reverse ahead. There are many candlestick patterns. Bullish Necklines is one of them. It is a two stick trend confirmation pattern that tells that the trend is expected to continue. There are two type of Neckline Patterns, the In Neck and the Out Neck. When you spot the Bullish Neckline in an uptrend, it is a signal that the trend is expected to continue for sometime.

The candle formed on the setup day should be a long bullish candle that shows a lot of buying. On the signal day a bearish candle either long or short is formed with its closing price very near the close of the setup day.

Now,there can be two types of Neckline Patterns depending on the closing prices on the signal and the setup days. In case, if the closing price on the first day is little lower than the closing price on the signal day, it is a In Neck Pattern. And if the closing price on the signal day is almost near the closing price on the setup day, it is an On Neck Pattern.

As you are currently well aware – the economy and markets are cyclic. In the past decade the value of metal based commodities have soared. The price increase for gold has been phenomenal.

Precious metals have gained tremendous value over the last few decades – but it has not been in a straight line.

The cost of living coupled with low inflation over the same time period has resulted in gold being a poor investment.

Gold will always have value being that it is a rare commodity, just like diamonds. Their value cannot be undermined in the way that paper currencies can be (by printing more money).

Investments in precious metals has always have been used as a backstop during times of economic duress.For example, from 1972 to 1980, when inflation peaked in the double-digit range stocks and bonds plummeted while gold and silver prices exploded by more than 500 percent. Gold has appeared to hit a bubble during this latest economic downturn.The quick increase in gold and silver prices appear to come out of fear versus actual inflation, which reduces the benefit of precious metals investing.

Investing in precious metals has not produced the expected returns over the long term.Over the decades, gold and silver investments hardly match the cost of living increases.Investing in gold and silver though, is better than just hording your cash. But as an investment the returns aren?t nearly as good as bonds, stocks, and real estate. Buying mutual funds or stocks can provide a better return if you truly want to invest in precious metals.

Market conditions keep on changing. What works now may not work in the future. What had worked in the past may not work anymore. It is very difficult to develop a trading system that can adjust to different market conditions. In simple terms, it is very difficult to adjust a mechanical trading system to a different market conditions if you are not the author of that system.

You must know this that technical indicators also lose their effectiveness overtime as the market conditions change. So how do you cater for this fact that markets keep on changing all the time. By developing a trading system that uses different trading strategy under different market conditions. For that, you will need to develop a diversified trading system consisting of a set of trading systems that can be used as a basis for a specific trade tactics at any given moment.

Such a diversified trading system can be used according to a trader’s free choice and considering the individual situation. Trading systems based on these principles can be complex and adjustable.

Such a diversified trading system can be optimized for current market condition and the trader’s resources at any given moment. This optimization can provide an effective evaluation of market shits and trends at any given time.