Commodity Futures Trading For Beginners 商品期货入门.docx

Commodity Futures Trading For Beginners 商品期货入门.docx

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CommodityFuturesTradingforBeginners

   ByBruceBabcock

TableofContents

1-Introduction

2-CommodityTradingAsAnInvestmentVehicle

3-TheRisksofTrading

4-TheHistoryofTrading

5-TheTradingProcess

6-MakingATrade

7-TheTruthAbouttheCommodityMarkets

8-SeparatingtheWinnersandLosers

9-LearningToTradeCorrectly

10.1-ElementsofaSuccessfulTradingPlan--GettingStarted

10.2-ElementsofaSuccessfulTradingPlan--TradeWithTheTrend

10.3-ElementsofaSuccessfulTradingPlan--CutLossesShort

10.4-ElementsofaSuccessfulTradingPlan--LetProfitsRun

10.5-ElementsofaSuccessfulTradingPlan--TheMarketsYouTrade

10.6-ElementsofaSuccessfulTradingPlan--ManageRisk

11-PsychologicalPitfalls

Introduction

Manypeoplehavebecomeveryrichinthecommoditymarkets.Itisoneofafewinvestmentareaswhereanindividualwithlimitedcapitalcanmakeextraordinaryprofitsinarelativelyshortperiodoftime.Forexample,RichardDennisborrowed$1,600andturneditintoa$200millionfortuneinabouttenyears.

Nevertheless,becausemostpeoplelosemoney,commoditytradinghasabadreputationasbeingtooriskyfortheaverageindividual.Thetruthisthatcommoditytradingisonlyasriskyasyouwanttomakeit.

Thosewhotreattradingasaget-rich-quickschemearelikelytolosebecausetheyhavetotakebigrisks.Ifyouactprudently,treatyourtradinglikeabusinessinsteadofagiantgamblingcasinoandarewillingtosettleforareasonablereturn,therisksareacceptable.Theprobabilityofsuccessisexcellent.

Theprocessoftradingcommoditiesisalsoknownasfuturestrading.Unlikeotherkindsofinvestments,suchasstocksandbonds,whenyoutradefutures,youdonotactuallybuyanythingorownanything.Youarespeculatingonthefuturedirectionofthepriceinthecommodityyouaretrading.Thisislikeabetonfuturepricedirection.Theterms"buy"and"sell"merelyindicatethedirectionyouexpectfuturepriceswilltake.

If,forinstance,youwerespeculatingincorn,youwouldbuyafuturescontractifyouthoughtthepricewouldbegoingupinthefuture.Youwouldsellafuturescontractifyouthoughtthepricewouldgodown.Foreverytrade,thereisalwaysabuyerandaseller.Neitherpersonhastoownanycorntoparticipate.Hemustonlydepositsufficientcapitalwithabrokeragefirmtoinsurethathewillbeabletopaythelossesifhistradeslosemoney.

Inadditiontospeculators,boththecommodity'scommercialproducersandcommercialconsumersalsoparticipate.Theprincipaleconomicpurposeofthefuturesmarketsisforthesecommercialparticipantstoeliminatetheirriskfromchangingprices.

Ononesideofatransactionmaybeaproducerlikeafarmer.Hehasafieldfullofcorngrowingonhisfarm.Itwon'tbereadyforharvestforanotherthreemonths.Ifheisworriedaboutthepricegoingdownduringthattime,hecansellfuturescontractsequivalenttothesizeofhiscropanddeliverhiscorntofulfillhisobligationunderthecontract.Regardlessofhowthepriceofcornchangesinthethreemonthsuntilhiscropwillbereadyfordelivery,heisguaranteedtobepaidthecurrentprice.

Ontheothersideofthetransactionmightbeaproducersuchasacerealmanufacturerwhoneedstobuylotsofcorn.Themanufacturer,suchasKellogg,maybeconcernedthatinthenextthreemonthsthepriceofcornwillgoup,anditwillhavetopaymorethanthecurrentprice.Toprotectagainstthis,Kelloggcanbuyfuturescontractsatthecurrentprice.InthreemonthsKelloggcanfulfillitsobligationunderthecontractsbytakingdeliveryofthecorn.Thisguaranteesthatregardlessofhowthepricemovesinthenextthreemonths,Kelloggwillpaynomorethanthecurrentpriceforitscorn.

Inadditiontoagriculturalcommodities,therearefuturesforfinancialinstrumentsandintangiblessuchascurrencies,bondsandstockmarketindexes.Eachfuturesmarkethasproducersandconsumerswhoneedtohedgetheirriskfromfuturepricechanges.Thespeculators,whodonotactuallydealinthephysicalcommodities,aretheretoprovideliquidity.Thismaintainsanorderlymarketwherepricechangesfromonetradetothenextaresmall.

Ratherthantakingdeliveryormakingdelivery,thespeculatormerelyoffsetshispositionatsometimebeforethedatesetforfuturedelivery.Ifpricehasmovedintherightdirection,hewillprofit.Ifnot,hewilllose.

InhisbookTheFuturesGame,ProfessorRichardTewelesexplainsthefunctionsofthefuturesmarkets:

"Inadditiontoreducingthecostsofproduction,marketingandprocessing,futuresmarketsprovidecontinuous,accurate,well-publicizedpriceinformationandcontinuousliquidmarkets.Futurestradingis[thus]beneficialtothepublicwhichultimatelyconsumesthegoodstradedinthefuturesmarkets.Withoutthespeculatorfuturesmarketscouldnotfunction."

Sincespeculatorsperformthevaluablefunctionsofprovidingliquidityandassumingtheriskofpricefluctuation,theycanearnsubstantialreturns.Thepotentiallylargeprofitsareavailablepreciselybecausethereisalsoariskofsubstantialloss.

©1999byRealityBasedTradingCompany

AllRightsReserved.

CommodityTradingAsAnInvestmentVehicle

Therearemanyinherentadvantagesofcommodityfuturesasaninvestmentvehicleoverotherinvestmentalternativessuchassavingsaccounts,stocks,bonds,options,realestateandcollectibles.

Theprimaryattraction,ofcourse,isthepotentialforlargeprofitsinashortperiodoftime.Thereasonthatfuturestradingcanbesoprofitableisleverage.

Forinstance,ifyouhada$10,000futurestradingaccount,youcouldtradeoneS&P500stockindexfuturescontract.Ifyouweregoingtobuytheequivalentamountofcommonstocks,youwouldcurrentlyneedabout$350,000,thirty-fivetimesasmuch.

Let'ssayyoudecidedthatthestockmarketwasgoingtogoup.Youcouldinvest$350,000andbuyindividualstocksequivalenttotheS&Pindex,oryoucouldbuyoneS&Pfuturescontract.BuyingafuturescontractisthesameasbettingthattheS&Pindexwillgoup.

IfyouhadmadeyourmoveonthefirsttradingdayofSeptember,1996andheldyourpositionfortwoweeks,yourcommonstockpositionwouldhavebeenworthabout$20,000morethanwhenyouboughtit,againofaboutsixpercent.Notbadforonlytwoweeks.Ifyouhadtakenthefuturesroute,however,youwouldhavemadethesame$20,000,whichwouldhavebeena200percentgainonthe$10,000marginrequiredinyourfuturestradingaccount.

Thatisanactualexampleofthetremendousreturnsyoucanearninashortperiodoftimetradingfutures.Ofcourse,youcanlosemoneyjustasfastifyoutradeinthewrongdirection.Supposeyouhadthoughtthestockmarketwasabouttogodownandyouhadsoldafuturescontractinsteadofbuyingone.Ifyouhadvaliantlyhelditfortwoweeks,youwouldhavelost$20,000.That'sagoodexampleofwhyyoumustexityourtradesquicklyiftheystarttomoveagainstyou.

Anotheradvantageoffuturestradingismuchlowerrelativecommissions.Yourcommissiononthat$20,000futurestradingprofitwouldhavebeenonlyabout$30to$50.Commissionsonindividualstocksaretypicallyasmuchasonepercentforbothbuyingandselling.Thatcouldhavebeen$7,000tobuyandsellabasketofstocksworth$350,000.

Whileprofitscanbelargeincommoditytrading,itisnoteasytomakeconsistentlycorrectdecisionsaboutwhatandwhentobuyandsell.

Commodityspeculationoffersanimportantadvantageoversuchilliquidvehiclesasrealestateandcollectibles.Thebalanceinyouraccountisalwaysavailable.Ifyoumaintainsufficientmargin,youcanevenspendyourcurrentprofitonatradewithoutclosingouttheposition.Withstocks,bondsandrealestate,youcan'tspendyourgainsuntilyouactuallyselltheinvestment.

Asyouwillsee,commoditytradingisnotparticularlycomplicated.Unlikethestockmarketwherethereareovertenthousandpotentialstocksandmutualfunds,thereareonlyaboutfortyviablefuturesmarketstotrade.Thosemarketscoverthegamutofmarketsectors,however,soyoucandiversifythroughoutallimportantsegmentsoftheworldeconomy.

Infuturestrading,itisaseasytosell（alsoreferredtoasgoingshort）asitistobuy（alsoreferredtoasgoinglong）.Bychoosingcorrectly,youcanmakemoneywhetherpricesgoupordown.Therefore,tradingadiversifiedportfoliooffuturesmarketsofferstheopportunitytoprofitfromanypotentialeconomicscenario.Regardlessofwhetherwehaveinflationordeflation,boomordepression,hurricanes,droughts,faminesorfreezes,thereisalwaysthepotentialforprofittradingcommodities.

Thereareeventaxadvantagestomakingyourmoneyfromfuturestrading.Regardlessoftheactualholdingperiod,commodityprofitsareautomaticallytaxedassixtypercentlong-termcapitalgainsandfortypercentshort-termcapitalgains.Thecurrentmaximumcapitalgainsrateisthirty-threepercent,somewhatlessthanthemaximumrateforordinaryincome.Totheextentthatcapitalgainstaxratesarereducedinthefuture,commoditytraderswillbenefit.Ifadistinctionisre-establishedsothattaxesonlong-termgainsarelowerthanonshort-termgains,commoditytraderswillbenefit.

©1999byRealityBasedTradingCompany

AllRightsReserved.

TheRisksofTrading

Beforebecomingtooexcitedaboutthesubstantialreturnspossiblefromcommoditytrading,itisagoodideatotakealong,soberlookattherisks.Rewardandriskarealwaysrelated.Itisunrealistictoexpe