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Is
There A Systematic Way To Trade Commodity Futures Which Will Build A
Small Account Into A Large Account And At The Same Time Limit Risk?
I've long been
fascinated by commodities trading. One of the reasons that I've been
fascinated by commodities trading is, of course, because of the
tremendous amounts of money that can be made by trading commodites.
Unfortunately, tremendous amounts of money can be lost by trading
commodities. Still, I've been fascinated by the challenge of trading
commodities. My long term goal is to be able to earn my living by
trading commodities. Is that a pipe dream? Well, we'll see.
In 1996 I bought Ken Roberts' commodity
trading course to learn about commodities. I studied the course, opened
an account, and, since then, through the years I've done a limited
amount of trading. I would make some money, lose even more money, and
finally run out of money. Then, I would build my account up again and
try again. I would definitely keep losing money but at least I
was learning about commodity trading.
I did learn that commodity trading can sure be tough at times.
Sometimes, it seems like one needs an infinite amount of patience to
learn to trade commodities. But, at ther same time, the rewards of
trading can make the frustrations worth it. You can see some of the
frustrations I experienced in in 2006 and 2007 when you visit my 2006
Completed Trades and my 2007
Completed Trades.
One of the biggest problems in learning to trade commodities is that,
while learning, mistakes can be very expensive in commodites
trading. Fortunately, there are some ways to minimize the risk.
One of these ways is by trading options on futures contracts rather
than futures contracts themselves. Generally, the maximum risk when
buying and selling options is the cost of the option.
Anther way to limit the risk is to trade with a
plan. I've developed a trading strategy that I use to plan and execute
my trades.
Also, I want to see if I can build up or accumulate
profits from a very small account balance. That is, I want to see if it
is possible to be successful even if one doesn't have very much money
to invest.
The advantage you'll have by returning often
to this page, is that you'll be able to actually see how I've done with
my trades. You'll be able to learn from my mistakes which is a definite
advantage.
On May 1, 2006, I started trading again with
an
initial balance
of only $577.00 which I know sounds like a ridiculous amount
of
money to start trading with, but I'm wanting to find out if it is
possible to turn such a small amount of capital into a large trading
account. Since May 1, 2006 I have been recording my commodities trades.
Mostly, I've traded options, but a few times I have used futures
contracts.
In 2006, I mostly lost money and I had to add
another $300 to my account and my brokerage account balance at the end
of 2006 was only $466.34. In the first nine months of 2007 I continued
to lose money and had to add more money to my trading account just to
keep trading. Finally, in the last three months of 2007, I began to
have better luck with my trading. I had two profitable trades, one in
Soybean Oil and the other in Corn. At the end of 2007, my brokerage
accout balance was $2,384.23
So, with the new year of 2008 before me, I'll
continue to see where my commodity trading takes me. To see my
completed trades of 2006 and 2007 or the trades I'm working on in 2008,
please click on the links below.
Articles On Commodity Trading
Commodity Trading : 1998 versus
2008
In
his book, Hot Commodities, author Jim Rogers talks about
the bear market in commodities ending in 1998 and a bull market
starting that will last at least until the year 2014. And, so far, Jim
Rogers seems to be quite accurate. We've undoubtedly seen a massive
bull market in the commodity energy sector, such as crude oil, and
gasoline and in the grain sector with corn and soybeans. If Jim Rogers'
time frame is accurate, even though we've seen some pullback in crude
oil and the grains, prices will rebound and continue to rise for some
time to come.
In view of the
fact that
the commodity markets were in a bear market
in 1998, it's very interesting to look at old commodity charts from
1998 and see where the markets were then and what the margins were
then.
If you purchase stocks on margin
you have what the IRS calls Investment
Interest. Investment interest is deductible on your 1040 as an itemized
deduction. However, there are stringent limits as to the amount of
investment interest may be deducted in any one year.
Continue
Reading Margin Interest Deduction Has Its Limits
What Is A
Capital Asset?
Most people who have investments such as stock and
bonds are aware
that stocks and bonds are capital assets and that the sale of stocks
and bonds may be subject to the long-term capital gains rates of
taxation that are much more advantageous than the tax rates on ordinary
income. However, many investors are not aware exactly what constitutes
the definition of a capital asset under the IRS rules and that not all
capital assets are treated equally.
Free Information For Beginners!
To be able to actually
follow my trades,
you'll need to understand the basics of commodity futures and options
trading. An excellent resource for beginners is a FREE
educational package, Options
on Futures Power Pack. With this
information, you can learn all of the basics of futures contracts,
options on futures contracts, plus learn some powerful trading
strategies, some of
which you will see me do with my actual trading. Click
here for
more information and to order Options
on Futures Power Pack - absolutely Free!
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The charting service I use is United
States Chart Company. This is a charting company started by Ken
Roberts. I've used these charts for several years. I find
the charts very easy to use an easy to read. There's charts for
42 commodities provided. There are Daily, Weekly, and Monthly
Charts for each commodity so its easy to study both short term and long
term charts to determine trends. A new feature called Trend
Seeker has recently been added. This feature tracks and analyzes
trends and trend strenghts in the various commodities. There's also a
Portfolio Tracker sections which lets the user track the profits and
losses of both real and paper trades.
You can still order paper charts, but I greatly prefer the online
charts because these are updated every trading day. The online charts
also have an interactive feature which lets the user "mark up his
charts" with helpful lines and notes.
The online charts are available for a reasonable monthly fee of $29.95
per month. Click
here to find out more about US Chart Company charts.
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Another tool that I use is TOVI. TOVI
stands for The Option Value Indicator and is an online trading tool
which analyzes the 42 major commodity markets. TOVI provides an
analysis of the trends and the strengths of the trends in the markets.
The most uselful TOVI tool is the Options Valuation Tool. TOVI
ranks approximately 10,000 options each day and provides a Value Factor
for each option. TOVI also alerts options traders if a particular
option is experiencing rapid time decay.
TOVI also offers a Volatility Module for those traders interested in
debit or credit spreads.
TOVI is operated by the Market Valuation Institute. The Market
Valuation Institute was started by Ken Roberts but he is no longer an
owner.
TOVI offers many benefits too numerous to mention here. Also, the
Market Valuation Institute is continuing to improve the site. TOVI does
provide a free two-week trial period. The monthly fee for TOVI is
$29.95. To check out the many benefits of TOVI , click here.
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About
J. Steven Tucker, CPA
Steven
Tucker is a Certified Public Accountant licensed in North Carolina and
has has his own CPA practice for the past eighteen years providing tax
and financial advice to a wide variety of small businesses. He has been
trading commodities, both futures contracts and options for about five years.
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Click
Here To E-mail Steven Tucker
MyLearn2Trade.com
1495 Rymco Drive Ste 203
Winston Salem NC 27103
336-760-1614
DISCLAIMER
Be aware that investment in commodity futures and/or options for
potential profit is accompanied by the risk of loss. You should
therefore carefully consider whether such trading is suitable for you
in light of your financial condition. The benefits of limited risk in
trading futures options is only available for long options (Buying
"Put" and "Call" Options.) "Limited Risk" refers to the amount of any
potential loss, not the likelihood of loss. Trading futures options can
involve the loss of the premium paid on the option, plus commissions
and fees. Past results are not indicative of future results.
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