Right now, as I write this, the stock markets are in the dumper. The Dow Jones Industrial Average and the S&P 500 are wallowing in a deep, extended trough (that’s stock market-ese for “in the dumper”).
Many people insist this is not a good time to be holding or buying stocks. My personal belief is that there is NEVER a good time to invest in stocks.
A share of stock is just a piece of paper. It represents nothing tangible. The fluctuations of a stock’s price are not really driven by changes in the value of the company that issued the stock. They’re driven by mob psychology.
Stocks are ultimately only as valuable as large groups of people (investors, analysts, fund managers) say they are.
Commodity futures, on the other hand, do represent an ownership interest in something tangible.
Corn, gold, oil. Solid, real stuff. Things that people want and/or need.
Commodity prices fluctuate in response to true market pressures, like good old supply and demand.
That’s why I maintain that commodity futures are less risky than stocks.
Do you think futures are scary? What would you call a $1,330,000,000,000 loss in value like the stock market suffered in May 2009 alone? If that isn’t scary, I don’t know what is.
You’ve probably heard the joke that a lot of peoples’ 401K’s are now 101K’s. Thank you, stock market.
You don’t know jack about futures, you say? Forget what you’ve heard or read about trading the futures markets.
“Common wisdom” about “commodities speculating” is like “common sense” – so uncommon as to be downright scarce.
To be successful in commodities trading, you need only a handful of skills: patience, determination, patience, skill, your powers of observation, and did I mention patience?
You also need to beware of what I call the Five Urban Myths of Futures Trading:
MYTH # 1: You’ll lose all your money trading futures.
THE TRUTH: Only if you don’t have a trading plan, a money management plan, and the discipline to stick to them.
MYTH #2: You need a lot of money to trade futures.
THE TRUTH: Some grain contracts can be purchased for under $1000.
MYTH #3: You have to be a high-powered expert to trade futures successfully.
THE TRUTH: Futures markets are very simple, and keeping up with them is also very simple.
MYTH #4: You have to stay glued to your computer monitor every minute the markets are open.
THE TRUTH: With some trading strategies you only have to look at charts once a day – some of them only once a week!
BIG LIE #5: The big guys get all the inside information before us and take all the profits.
THE TRUTH: Forget fundamental analysis, grain forecasts, and all that stuff; stick to what the market is telling you through the charts.
Futures markets are actually quite simple. For example, they can only go in three directions: up, down, or sideways.
Also, there are only two positions: you’re either in the market or you’re not in the market.
Risky? Commodities trading is closely supervised by the Commodities Futures Trading Commission (CFTC).
To become successful at futures trading you only need to master a few basic concepts:
What to trade (and what not to trade)
What leverage is and how it can increase your profits
How to let the market tell you where it’s going
Getting in, protecting your backside, and getting out
How to manage your money to reduce your risk
I lost my shirt (and my pants, shoes, socks, underwear, and a number of things I didn’t even own) in the really big stock market meltdown back in 1986.
After getting my clothes back, I’ve been trading successfully in the futures markets.
There’s a lot of information available about commodity futures trading. Unfortunately, most of it is way too technical for most people.
For free information about one of the best, clearest, simplest, most concise resources from which I’ve learned a great deal about profitably investing in the futures markets,
Best of success in your investing and trading adventure!