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Whenever you or I invest in stock indexes, or in stocks themselves, we find that we are actually investing in intangible things or in bits of paper which identify money at risk.  You and I can’t very well touch, a stock index.  Such an invention exists purely in the observer’s mind or on a sheet of paper or on one’s computer visual display.  However, when we invest in Commodities, we exercise control over common items that we use constantly – staples such as rice, coffee, sugar, beef, and cotton.  There is something much more “personal” about it.

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One of the major differences between trading stocks (on the one hand)and the Commodities (on the other) is that stock and stock index trading is almost entirely driven by emotion, while Commodities trading is principally driven by the law of supply and demand.  This, in turn, depends upon weather patterns, the amount of rain which has fallen, carryover (if any) of the previous year’s harvest, amount of acreage planted, animal birthing levels, price of animal feed, historical slaughter rates, availability of labor and transportation,cost of transportation, variations in worldwide usage, and general economic conditions both at home and around the world.

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Since emotional input applies less to trading in Commodities than it does to stock trading, it follows that we can more accurately forecast the future direction of Commodities prices.  We can learn to interpret the formations of the undulating waves of prices and of certain Indicators which we read in conjunction with price information in order to be able to quite precisely forecast what prices will do in the future – particularly in the immediate future, such as tomorrow morning

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Whether we think that prices will increase – or decrease – makes no difference at all.  We can wager either way.  Of course, we would much rather choose correctly !

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We all have heard tales of woe in connection with a shipment of corn being unceremoniously deposited at the trader’s front lawn.  That conceivable might occur, but you’d really have to work at it.  A bit of common sense and attention should be sufficient to keep anyone away from that risk. And, if you stick to purchasing options and avoid getting involved in contracts, at least while you learn the business, it it would be impossible for it to happen.  The marvelous advantage of buying options is that all of the cards are in your hand.  You put your money on the table and all the cards are yours.  At the same time,the limit of your risk is the money which you paid when you purchased the option.  You have the right, but not the obligation, to perform.  The party who has sold you the option is burdened with all of the risk.

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Now hear the really marvelous aspect of Commodity trading: Even before you begin to think about committing real money, you can reduce your risk of loss to zero by paper-trading for as long as you like while you learn the system.  What a great idea! Here’s the opportunity to learn a new skill without risking even so much as a cent.

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And, actually, this is a fascinating world.  It is immensely satisfying to make a wager on the direction of the price of a Commodity – even a paper bet! – and have it go in the direction you predicted.

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You should not do this haphazardly.  We know that prices move in waves; that those waves move in patterns; and that such patterns repeat themselves and are roughly predictable in their size and direction as the days pass.  We do not simply stick a wet thumb in the passing breeze and take a wild guess; we make our decisions having the benefit of a basic understanding of Japanese Candlestick price formations and of the many Indicators which send us clues regarding the next likely direction of prices.  So, it really isn’t guesswork by any means.  This is a world of probabilities, not certainties, with knowledge of these helping hands right there with us, guiding us to investment decisions which are sensible.  It’s a consolidation of all of the evidence before funds are placed at risk.

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Over a course of years of trading, I have found that trading Commodities is truly an enjoyable intellectual exercise that, when it is done conservatively and smartly, can be a real moneymaker, at a level of risk which is completely controllable by the trader.

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http://www.CommoditiesJunction.com/

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