The answer m? Sf? Easy for this question is: who does not mind being in a market m? S risky. In fact, the commodities market is reputed to be as vol? Til that luck can be made or lost in issues? N of minutes or hours, if you do not know what he is? doing. For better comprehension? N invest in the commodities market, let’s look at some of the basics. ? Qu? is a Goods? to? A Goods? To is anything that can be bought or sold. Examples of Goods? To may include petr? Leo, gold, oranges and currency. When you invest in commodities, which are b? Basically betting on what the market will do. You bet that the price of oranges will rise? or that the value of d? lar fall?. Investment strategy? No raw materials Most? To financial experts recommend not investing anything in the commodities market can not afford to lose. Not the kind of investments? N for someone who wants to an INVESTMENT? No account safe for jubilaci? No, unless you put your money in a managed account. However, if you do not mind a risk m? S highest return for the increased possibility of higher returns, products b? Musicians can? To be a good option? N. The products are a great way to use a Porcia? N of its portfolio in higher risk / return of investments? Nm? S high, but should never be used as an important segment of its portfolio. INVESTMENT Safe? No products b? Musicians If you really want to take your turn at commodities investment, but want to minimize your risk, take a look at the funds of products b? Musicians. Because these funds are a mix of different products, the risk can be minimized by the very nature of the portfolio. If m? S risky? Why? would anyone invest in commodities? The return, when someone wins on the market, can be extremely high. There was a No? Mere millionaires through? S commodity trading and back? to do so in the future. Adem? S, long been known that the commodity market is a hedge against Inflation? N large. When the inflation? No strikes unexpectedly, the funds of products b? Musicians tend to do much better. For? Last of them, the products b? Musicians est? N always in demand. Gold, petr? Read and always have money? because we need a market. They will never become outdated and the application does not disappear? ever. Investing in products b? Musicians may be the investment? N perfect for anyone who does not mind using a little? Portia? N of its portfolio in high-risk activities to achieve maximum reward. If you do not have the time to follow markets and industries in the d? Aad? A time or hours a day you, through commodity funds are the next best thing.
Negotiation of goods is, talking about trade in physical goods – such as soy, wheat, corn, gold, silver, livestock, oil, etc – or futures contracts on commodity exchanges established. Farmers use commodity trade to set favorable prices before one of the following harvest. Therefore, there are real business reasons for commodity trade. However, they also traded for pure speculation by private traders who seek to profit by speculating in commodity trade the price movement of its time-frame chosen. More than any other type of speculation, as the currency or securities trading, commodities markets involve a high degree of seasonality. Therefore, it is important that the seller be aware of fundamental cycles that affect the market in question. That said, the commodity trade can be done successfully, giving a high degree of importance on price charts. The commodity trade very well according to the methods of technical analysis. For example, Fibonacci retracements price and time cycle analysis work very well on the charts of commodities. The same applies to other technical indicators like moving averages, price differences, support and resistance points, trend lines and so on. Commercial products may be a very volatile and unpredictable business because these markets are known for their sudden and sustained surges and price collapses. Compare a chart of long-term commodity of something like soybean oil or any stock index and see the difference. Therefore, it is vitally important in the trade of commodities that are very disciplined in its approach and employ strict money management rules. An order to halt the loss of good, put on the market at the time of placing the trade, is a must. Retailers also play the spreads between commodities, which is a very popular commodity trading, and in fact multiplies the range of opportunities for huge profit. Examples of the differential is the spread of wheat-maize, where traders speculate on the relative price of one another. Other expansion opportunities occur in the price differentials between delivery months of contract the same products “futures. Therefore, it is possible to buy the contract closest to expiration and sell one more with the expectation that long-term price of this product will be reduced compared to prices in the short term. Once you also realize that there are active options contracts in all major instruments, it is clear that trade in commodities is a highly desirable niche within the universe of speculation. As with all forms of negotiation, mental and financial discipline are key factors for success in trading commodities. Given its extreme volatility, it is very important that you have a proven method sometime before a single dollar to speculate in these markets often unpredictable. You should also remember that these are real physical products involved, and it literally can be delivered, if you do not close your position before the expiry of the future of the commodity or option contract. Otherwise, can result in a truck pulling up outside his house with his delivery of soybeans, live cattle or cocoa – depending on what they have been negotiating. This has been known to happen! That said, the opportunities present in commodity trading are enormous and exciting. These markets to see some real action, and also has the pleasure of knowing that are trading in real-world points, which can lead to negotiations on a new meaning.
Foreign Exchange (Forex) Trading is whether the currency of one country will go up or down in comparison to another currency. When trading in the Forex trading currency pairs: The pairs of currencies that go up or down relative to each other. When commodity trade (anything found in nature or planted) to determine whether the price of a product will go up or down depending on whether you think there will be a good growing season, increasing the prospects mining, a poor growing season flooding, drought, strikes, etc. Mother Nature has a much stronger role in commercial products as it does in currency trading. And we all know that “It is not good to fool Mother Nature.” World Events: As mentioned above, the constant change in weather patterns from year to year can wreak havoc on the commodities market. This is not the time that could be the miners’ strike, new discoveries of minerals, dry wells, war, or a multitude of different events, all of which can completely change the outlook for commodities. The possibility of good size gains in the market of raw materials, but the risk of large losses due to crop failures, etc. is also present. You have to be very careful if you play the commodities market. With Forex, the foreign exchange market may also be affected by changes in the world, but often have a less dramatic effect on its portfolio of what can happen to commodities. In general, the foreign exchange market is the safest bet of the two. Forex trading information easy to find: Information on trade in raw materials can be quite difficult to find, especially information which is free. There is a large amount of information available, but much of it is expensive to obtain. Forex information is more accessible and most are free. You may also register for the accounts of the practice in many parts of the currency and in fact try their hand at Forex trading without risking their capital. This makes for a great introduction to Forex and lets you know what are the possibilities. These Forex practice accounts are not normally present in the commodity arena. Hours: The Forex market is open 24 hours a day, five days a week. No other open market so long. If Forex trading, you have more opportunities and time to complete their transactions and trade rather than raw materials or any other market. Liquidity – Ease of Purchase and Sale: Again, the forex market does the most volume in comparison to other markets. If this will be easy to buy and sell positions, Forex will be easier with all its volume. High degree of predictability: commodity prices can jump over the board depending on demand, weather, the percentages of the crops grown, the oil found or not found etc. currency markets are more predictable. Sure, the prices of currencies may fluctuate and become volatile at times, but more than one employer is involved with the currency. More trends created in Forex you can follow compared to the commodities market. This can make it easier to be consistent in forex trading. Free Trade Commission and instant order execution: Because the Forex market is an open market and has no centralized trading floor where trading in the Forex, you pay an intermediary. In other words, you do not pay a commission to trade. The money is made by the institutions in the difference between the bid and ask prices, but as with any market. The fact that you pay no commissions or fees can really save money in the long term. Both Trade Commodities and Forex Trading can be exciting and profitable. It is for the individual investor to decide what is best for their respective situations. With more information available to Forex Trading and it is free or very cheap, with free demo accounts available to business practices, it is hard to go wrong with Forex Trading.
I am interested in commercial products (mainly agricultural) online, what is the best company to go with? My initial idea was for $ 5,000 – but so far I have researched companies with a minimum of $ 10,000. I’m not looking for a get rich quick scheme. . . and interested in the “DIY” a little. I am looking for reliability, low fees and an easy to use trading platform. Thanks!
INVESTORS PREFERENCE IN COMMODITIES MARKET
* K.Logeshwari
** V.Ramadevi
ABSTRACT
The study entitled “Investors preference in commodities market” was conducted in Coimbatore KARVY STOCK BROKING LIMITED. The study was undertaken to know the preference of the investors towards various Investment avenues in relation to commodity market. The sample from the population is taken based on regular customers to the Coimbatore Karvy. The expectations of the investors are quite high. Many expect high rate of return for further investment through commodity market. The study also examines the phenomenal growth in commodity market which is ten times greater than the share market. The study reveals that the commodity market is in a nascent stage in Coimbatore.
The investment avenues of individual investors depend mainly on annual income as well as risk taking capacity of the individuals. Regularity in investing, percentage of savings also has a major impact in choosing the investments. The study on investor’s preference in commodity market also gives an idea of the investor’s choice based on returns, risk and their awareness in choosing the market particularly in conducting appropriate training sessions and seminars frequently to the clients of Karvy Commodity market in Coimbatore at Karvy Commodity Trade Limited.
INTRODUCTION
A commodity futures contract is a type of derivative, or financial contract, in which two parties agree to transact a set of financial instruments or physical commodities for delivery at a particular price at later date. But participating in the commodity market does not necessarily means that you will be responsible for receiving or delivering large inventories of physical commodities. Buyers and sellers in the futures market primarily enter into futures contracts to hedge risk or speculate rather than delivery (which is the primary activity of the cash/spot market). That is the reason commodities are used as financial instruments by not only producers and consumers but also speculators.
——————————————–
* Lecturer, Department of management studies and Research, Karpagam University , Coimbatore – 641021 ,Tamilnadu
* * Lecturer, Department of management studies and Research, Karpagam University , Coimbatore – 641021, Tamilnadu
Commodity market is extremely liquid, risky and complex by nature. Futures market is centralized market place for buyers and sellers from around the world who meet and enter into commodity futures contracts. Pricing is mostly is based on an open cry system, or bids and offers that can be matched electronically. The commodity contract will state the price that will be paid and the date of delivery. Almost all futures contracts end without the actual physical delivery of commodity.
Commodity prices are generally less volatile than the stocks. Therefore it’s relatively safer to trade in commodities. But the volume being traded in commodities is much less than the stock market. This is because of the two reasons that the investors are less aware about the commodities market and their risk perception. Hence many studies are conducted to know the investors’ preference in commodities market.
STATEMENT OF THE PROBLEM
Commodity market has been established for the benefit of small and large investors. But the level of investment in this trading is far lesser than the other modes of investors. The need of the hour is the proper guidelines and education to all investors.. An investment in commodity market is though less risky than that of the stock market. This is because, the investors are less aware about commodities market. Hence the purpose of the study is to assess the knowledge and preference of the investors in the commodity trading.
OBJECTIVES OF THE STUDY
PRIMARY OBJECTIVE
v To study the investors’ preference towards commodities market.
SECONDARY OBJECTIVE
v To identify the investment patterns of investors.
v To know whether the investor’s opinion about international commodities market affects the national trading activity.
v To identify the source of information about commodities market.
v To profile the commodities investors.
SCOPE OF THE STUDY
v Understanding the investor’s risk towards commodity market.
v The study helps us to know about the Investor’s preference towards commodity market.
RESEARCH METHODOLOGY
Research Design : Descriptive Research
Data Source : Primary and Secondary Data
Primary Data Collection : Survey Method
Primary Data Collection Instrument : Questionnaire
Sampling Methods & Technique : Non-Probability Method, Convenience
Sampling Technique
Sample size : 150 respondents
Pilot study : 10 respondents
TOOLS USED
PERCENTAGE ANALYSIS
The tool used for the sampling technique is percentage analysis. It is used to determine the percentage of the samples to be selected from the entire population.
CHISQUARE TEST
The chi-square test is an important test amongst the several tests of significance. Chi-Square, symbolically written as (Pronounced as
Ki-Square), is a statistical measure used in the context of sampling analysis for comparing a variance to a theoretical variance.
=
where
Oij = Observed frequency of the cell in ith row and jth column.
Eij = Expected frequency of the cell in ith row and jth column.
The statistical tool is used for the analysis part of the study is chi-square test. It is a statistical measure used in the context of sampling analysis foe comparing a variance to a theroretical variance. It can be used in calculations to test for statistical significance of estimated parameters and to measure goodness of fit of individual equations in a model.
LIMITATIONS OF THE STUDY
Though utmost care was taken to do the research, some of limitations viz.,
v The study is limited to Coimbatore city.
v It is conducted only with the investors of KAVRY com trade private limited.
v The data collected from the samples might not be completely appropriate.
v The respondents were less interested in answering the questionnaire, as they felt that it was an interruption to their regular work.
v All respondents were not very much open in giving their details. As the questionnaire contains details of the trader’s income the trader might not have given the correct information for their own savings (for tax problem).
RESULTS AND DISCUSSIONS
Ø It is found that 86%of the respondents belong to male gender and 68% of the respondents are married.
Respondents to the extent of 40% belong to the age group of 26 years to 50 years.
Ø About 48% of the respondents are postgraduates.
Ø About 46% of the respondents are salaried.
Ø The study reveals that 52% of the respondent’s annual income ranges between Rs. 1, 00,000 to Rs 5, 00,000.
It is found that 42%of the respondents specify Gold in Bullion market.
Ø It is found that 48% of the respondents specify Peeper in Agri-commodity market
It is found that 44% of the respondents specify Zinc in Metals.
Ø About 54% of the respondents invest 25 % to 50% of their income.
About 62% of the respondents will definitely recommend others to enter in to the commodity market.
Ø It is found that 38 %of the respondents were referring friends as their source of information.
Ø About 36% of the respondents will rank 2nd & 3rd place in their specialty of trading in commodity market as Price Hedging
Ø About 38% of the respondents rank 3rd place in Regulated market.
Ø About 46% of the respondents rank 1st place in High return.
Majority 62% of the respondents do their trading daily.
Ø About 56% of the respondents aware about the commodity market to some extent.
Ø About 52% of the respondents are been satisfied with their commission charges paid.
Ø Majority 66% of the respondents are been traded up to the margin money below 5, 00,000.
Ø About 40% of the respondents are satisfied with their level of returns.
Ø It is found that 97% of the respondents agree that international market has got an impact over national market.
Ø About 70% of the respondents’ High risk is involved in the commodity market.
Ø Majority 82% of the respondents will also invest in other modes of investment.
Ø Respondents to the extent of 50% invest in the shares.
Ø Out of their past experience respondents would take to control risk by 36% while at the time of buying and selling the commodities.
CONSIDERED RECOMMENDATIONS
Ø The company can rise up its investments by educating the public about the benefits that they can reap from the commodities market through awareness programs, advertisements.
Ø Since most of the investors are those who trade in share market and it is very easy to make them invest in higher margin commodities.
Ø The findings reveal that majority of the investors are within the age group of 26-35 years, so the company can provide their customers some additional assistance like daily trading tips, daily positions, and general news for doing a better trading with the commodities market.
Ø The investors in Coimbatore are not much aware of commodity market and the commodities being traded in the commodity market. So, awareness about the commodity market and the commodities being traded.
Ø A regular investor’s friendly seminar can be organized to suit the timings of the investing public. Seminars can be in the form of interactive sessions, arranged at frequent intervals.
Ø The newsletters published by Karvy must include the suggestions provided by the research team to help the investors to better understand the tactics of trading in commodity market. Hence newsletter can be published for guidance.
Ø Workshops can be conducted in villages for the farmers to educate them about commodity market.
CONCLUSION
Commodities market provides a platform for the investors as well as hedgers to protect their economic interests as well as increase their investible wealth. However, there is a need to profile the investors in this market with their preferences and pattern. This will help the commodity trading companies to focus their offerings to suit the needs of the commodity investors. Also, the companies should understand the expectations of their clients and their level of satisfaction. With this in mind, a study was conducted through the Karvy Comtrade Limited, where a sample of 150 respondents was drawn for study. A structured questionnaire with the relevant indicators was administered to primarily identify the investors’ preference towards commodities market. The study also intended to identify the investment patterns of investors, to know the investors’ opinion on the effect of international commodities market over the national trading activity, to identify the source of information about commodities market, and to profile the commodities investors.
The investors are not fully aware of the functioning of commodity market and they draw market information from Print media, Web media and Peer groups.
INVESTORS PREFERENCE IN COMMODITIES MARKET
* K.Logeshwari
** V.Ramadevi
ABSTRACT
The study entitled “Investors preference in commodities market” was conducted in Coimbatore KARVY STOCK BROKING LIMITED. The study was undertaken to know the preference of the investors towards various Investment avenues in relation to commodity market. The sample from the population is taken based on regular customers to the Coimbatore Karvy. The expectations of the investors are quite high. Many expect high rate of return for further investment through commodity market. The study also examines the phenomenal growth in commodity market which is ten times greater than the share market. The study reveals that the commodity market is in a nascent stage in Coimbatore.
The investment avenues of individual investors depend mainly on annual income as well as risk taking capacity of the individuals. Regularity in investing, percentage of savings also has a major impact in choosing the investments. The study on investor’s preference in commodity market also gives an idea of the investor’s choice based on returns, risk and their awareness in choosing the market particularly in conducting appropriate training sessions and seminars frequently to the clients of Karvy Commodity market in Coimbatore at Karvy Commodity Trade Limited.
INTRODUCTION
A commodity futures contract is a type of derivative, or financial contract, in which two parties agree to transact a set of financial instruments or physical commodities for delivery at a particular price at later date. But participating in the commodity market does not necessarily means that you will be responsible for receiving or delivering large inventories of physical commodities. Buyers and sellers in the futures market primarily enter into futures contracts to hedge risk or speculate rather than delivery (which is the primary activity of the cash/spot market). That is the reason commodities are used as financial instruments by not only producers and consumers but also speculators.
——————————————–
* Lecturer, Department of management studies and Research, Karpagam University , Coimbatore – 641021 ,Tamilnadu
* * Lecturer, Department of management studies and Research, Karpagam University , Coimbatore – 641021, Tamilnadu
Commodity market is extremely liquid, risky and complex by nature. Futures market is centralized market place for buyers and sellers from around the world who meet and enter into commodity futures contracts. Pricing is mostly is based on an open cry system, or bids and offers that can be matched electronically. The commodity contract will state the price that will be paid and the date of delivery. Almost all futures contracts end without the actual physical delivery of commodity.
Commodity prices are generally less volatile than the stocks. Therefore it’s relatively safer to trade in commodities. But the volume being traded in commodities is much less than the stock market. This is because of the two reasons that the investors are less aware about the commodities market and their risk perception. Hence many studies are conducted to know the investors’ preference in commodities market.
STATEMENT OF THE PROBLEM
Commodity market has been established for the benefit of small and large investors. But the level of investment in this trading is far lesser than the other modes of investors. The need of the hour is the proper guidelines and education to all investors.. An investment in commodity market is though less risky than that of the stock market. This is because, the investors are less aware about commodities market. Hence the purpose of the study is to assess the knowledge and preference of the investors in the commodity trading.
OBJECTIVES OF THE STUDY
PRIMARY OBJECTIVE
v To study the investors’ preference towards commodities market.
SECONDARY OBJECTIVE
v To identify the investment patterns of investors.
v To know whether the investor’s opinion about international commodities market affects the national trading activity.
v To identify the source of information about commodities market.
v To profile the commodities investors.
SCOPE OF THE STUDY
v Understanding the investor’s risk towards commodity market.
v The study helps us to know about the Investor’s preference towards commodity market.
RESEARCH METHODOLOGY
Research Design : Descriptive Research
Data Source : Primary and Secondary Data
Primary Data Collection : Survey Method
Primary Data Collection Instrument : Questionnaire
Sampling Methods & Technique : Non-Probability Method, Convenience
Sampling Technique
Sample size : 150 respondents
Pilot study : 10 respondents
TOOLS USED
PERCENTAGE ANALYSIS
The tool used for the sampling technique is percentage analysis. It is used to determine the percentage of the samples to be selected from the entire population.
CHISQUARE TEST
The chi-square test is an important test amongst the several tests of significance. Chi-Square, symbolically written as (Pronounced as
Ki-Square), is a statistical measure used in the context of sampling analysis for comparing a variance to a theoretical variance.
=
where
Oij = Observed frequency of the cell in ith row and jth column.
Eij = Expected frequency of the cell in ith row and jth column.
The statistical tool is used for the analysis part of the study is chi-square test. It is a statistical measure used in the context of sampling analysis foe comparing a variance to a theroretical variance. It can be used in calculations to test for statistical significance of estimated parameters and to measure goodness of fit of individual equations in a model.
LIMITATIONS OF THE STUDY
Though utmost care was taken to do the research, some of limitations viz.,
v The study is limited to Coimbatore city.
v It is conducted only with the investors of KAVRY com trade private limited.
v The data collected from the samples might not be completely appropriate.
v The respondents were less interested in answering the questionnaire, as they felt that it was an interruption to their regular work.
v All respondents were not very much open in giving their details. As the questionnaire contains details of the trader’s income the trader might not have given the correct information for their own savings (for tax problem).
RESULTS AND DISCUSSIONS
Ø It is found that 86%of the respondents belong to male gender and 68% of the respondents are married.
Respondents to the extent of 40% belong to the age group of 26 years to 50 years.
Ø About 48% of the respondents are postgraduates.
Ø About 46% of the respondents are salaried.
Ø The study reveals that 52% of the respondent’s annual income ranges between Rs. 1, 00,000 to Rs 5, 00,000.
It is found that 42%of the respondents specify Gold in Bullion market.
Ø It is found that 48% of the respondents specify Peeper in Agri-commodity market
It is found that 44% of the respondents specify Zinc in Metals.
Ø About 54% of the respondents invest 25 % to 50% of their income.
About 62% of the respondents will definitely recommend others to enter in to the commodity market.
Ø It is found that 38 %of the respondents were referring friends as their source of information.
Ø About 36% of the respondents will rank 2nd & 3rd place in their specialty of trading in commodity market as Price Hedging
Ø About 38% of the respondents rank 3rd place in Regulated market.
Ø About 46% of the respondents rank 1st place in High return.
Majority 62% of the respondents do their trading daily.
Ø About 56% of the respondents aware about the commodity market to some extent.
Ø About 52% of the respondents are been satisfied with their commission charges paid.
Ø Majority 66% of the respondents are been traded up to the margin money below 5, 00,000.
Ø About 40% of the respondents are satisfied with their level of returns.
Ø It is found that 97% of the respondents agree that international market has got an impact over national market.
Ø About 70% of the respondents’ High risk is involved in the commodity market.
Ø Majority 82% of the respondents will also invest in other modes of investment.
Ø Respondents to the extent of 50% invest in the shares.
Ø Out of their past experience respondents would take to control risk by 36% while at the time of buying and selling the commodities.
CONSIDERED RECOMMENDATIONS
Ø The company can rise up its investments by educating the public about the benefits that they can reap from the commodities market through awareness programs, advertisements.
Ø Since most of the investors are those who trade in share market and it is very easy to make them invest in higher margin commodities.
Ø The findings reveal that majority of the investors are within the age group of 26-35 years, so the company can provide their customers some additional assistance like daily trading tips, daily positions, and general news for doing a better trading with the commodities market.
Ø The investors in Coimbatore are not much aware of commodity market and the commodities being traded in the commodity market. So, awareness about the commodity market and the commodities being traded.
Ø A regular investor’s friendly seminar can be organized to suit the timings of the investing public. Seminars can be in the form of interactive sessions, arranged at frequent intervals.
Ø The newsletters published by Karvy must include the suggestions provided by the research team to help the investors to better understand the tactics of trading in commodity market. Hence newsletter can be published for guidance.
Ø Workshops can be conducted in villages for the farmers to educate them about commodity market.
CONCLUSION
Commodities market provides a platform for the investors as well as hedgers to protect their economic interests as well as increase their investible wealth. However, there is a need to profile the investors in this market with their preferences and pattern. This will help the commodity trading companies to focus their offerings to suit the needs of the commodity investors. Also, the companies should understand the expectations of their clients and their level of satisfaction. With this in mind, a study was conducted through the Karvy Comtrade Limited, where a sample of 150 respondents was drawn for study. A structured questionnaire with the relevant indicators was administered to primarily identify the investors’ preference towards commodities market. The study also intended to identify the investment patterns of investors, to know the investors’ opinion on the effect of international commodities market over the national trading activity, to identify the source of information about commodities market, and to profile the commodities investors.The investors are not fully aware of the functioning of commodity market and they draw market information from Print media, Web media and Peer groups.
BIBILIOGRAPHY
1. Pandey .I.M. Financial Management, Vikas publishing house Pvt Ltd(1991) 9 th edition
2Kothari Rubin , Statistics for Management , Prentice Hall of India Pvt. Ltd 8 th edition
3Kothari C.R. Research Methodology , New Age International Pvt Ltd 8 th edition
4.The Karvy Finapolis Magazine – Weekly , Monthly & Yearly edition
WEB SITES
1. www.karvycomtrade .com
2. www.karvy .com
3. www. Mcxindia.com
4. www.dailyfutures.com
Traders who trade for a living are generally swing traders or day traders. If you are planning to day trade in commodities, then you need to get hold of a reliable trading system that gives good results consistently. Despite having such a system, there are a few things you may want to know about day trading in the commodity markets.
Day Trading Defined
Those who trade and complete all their trades within the period of a day’s trading session are known as day traders. Day traders have to square off all their trades by the end of the 24-hour period. That is their time limit. If they hold their positions for any longer, they can then be called position traders, and not day traders. They are the most common form of traders to be found in commodity markets.
Day traders like to churn their capital on a day to day basis to maximize its return. They prefer not to lock in capital for extended periods of time. More often than not, they have very limited capital to leverage, and cannot afford to block it all. Speed is the name of the game where day trading in commodity futures is concerned.
Facts About Day Trading
It has been observed that you stand a better chance of earning money in day trading commodity markets if you are prepared to invest a bigger amount of money. This is because more money gives you the option to diversify your investment and manage the risks better.
An important component of commodity futures trading, is using charts that allow you to decide what you want to do. Secondly, those who follow trends taste success.
As in all things, there are limitations that day traders face. The most important one is that they trade in a single day’s session. Hence, they cannot let their profits run any longer even if they want to – they are limited by time. They prefer by choice to take the money and run. Time is money, and time is limited. Another issue that crops up at some time or another for day traders is their stops. They cannot have too large a stop for fear of losing a lot of money. Therefore, they have to keep narrow stops, and thus increase their chances of being whipsawed out of a trade early. Ask any old hand about being whipsawed, and they will tell you that it is a part of the game. Daily ranges also limit targets, as the luxury of hanging on is not available. Quick profits are targeted, and many a time commodity day traders have to get out of a trade at the end of the day having made very little or no money from it.
However, day traders are not to be under estimated in any way. They truly form the volume numbers of the commodity market. Many intraday movements are because of day traders. They cause sudden spurts in commodity prices with heavy buying or selling. An integral part of the market, they form the backbone of the commodity market.
The physical demand for commodities continues to be strong as world demand for all sorts of commodities, from metals to oil to grains remains high. While demand in the US seems to be declining due to a soft US economy what takes place in the US market is not as important now as it was a decade ago. The rapid growth of the economies in places like China, India, Brazil, and Russia, are keeping the upward pressure on commodity demand.
While we are probably less than half way along in a commodity bull market trading commodity futures and options trading is not suitable for everyone. Commodity futures are highly speculative. If you decide to go after the high returns available from trading commodities you should only use investment capital that you can afford to expose to such investment activity. That is trade only with capital that you can afford to lose. Commodity futures are derivative, short-maturity claims on real assets. Many commodities have pronounced price/volatility seasonality as well as being subject to rapid fluuations in daily prices. If you have a heart condition do not attempt to trade commodities.
Commodity futures spread trading offers an exciting path for potential profits often overlooked by futures traders. However, if you think you are going to make a fast fortune trading spreads or any other futures product in the commodity casino, why not just donate your money to your favorite charity instead of handing it over to the “pit vipers” on the trading floor? When you trade commodities you are up against some of the smartest, most ruthless traders in the world. You need to be well prepared to trade commodities at a profit.
While the Commodity Futures Trading Commission ( CFTC ) is responsible for insuring market integrity and protecting market participants against manipulation, abusive trade practices, and fraud the CFTC will not protect you from sudden and at times drastic changes in price levels. Your favorite commodity may still be in a roaring bull market but if you are over leveraged a sharp correction within the trend could still wipe you out.
Traders are often unprepared to deal with a string of losses in spite of the fact that this is part of every trading system. They often begin with less trading capital than is realistically required in order to survive a period of draw down. To attempt to improve their trading systems commodity traders can test their skills going back to past periods and stepping through daily and weekly price charts one day at a time. Each day forward charts update and the trader can see how well they did and how well their tools and strategies did in anticipating market movement.
Investing in the futures market and or stock market is risky and with futures you can lose more then your initial investment. Skilled investment management professionals have been using managed futures for more than 20 years with positive results. With practically a zero correlation with stocks, one of the most attractive features of managed futures is its ability to add profound diversification to an overall investment portfolio. Still it remains a risky business that requires a lot of skill and self discipline if one is to trade at a profit.
The oil market has been the big mover over the past year or so. Oil traders and hedge funds began to purchase extra oil at current prices. The surge in demand, linked to perceived trends in the futures market, generated an upward pressure on current prices. Oil is priced in dollars, which makes it more affordable for foreigners paying with stronger currencies. While oil speculators may have played some role in pushing oil prices higher the US government and its policies that lead to a weak US Dollar is much more responsible for high oil prices than the speculators who are merely following the bull market trend.
Since most oil market transactions are priced in US Dollars as the Dollar falls it supports higher prices for oil and all other Dollar denominated commodities as well as finished imported goods. Unfortunately, most US congressmen and the executive branch of the US government would rather point fingers at oil company executives and at oil market traders than take a realistic view that it is their own misguided policies that have unleashed the inflation monster on the world’s commodity markets.
It is a highly interesting although dangerous time to be trading commodity markets. That is not to say that the skilled, well capitalized trader will shy away from commodity markets under present highly volatile market conditions. They will not. Experienced successful traders will probably do very well in markets that have a bullish basis that will likely last for many years. They will use the sharp corrections within the trend to reestablish positions or to put on additional positions at better prices and ride out the mega trend to outstanding profits.
The first thought of some regarding the word, speculation in the commodity markets is of total risk or cowboy mentality. More so, the term speculator is looked down upon by the idea of trying to control the crude markets or selling short last year. All of these are inaccurate.
What really is Speculation in the Commodity Markets? If the speculation is done correctly with risk & money management rules then one might say Trend following is a form of speculation. Let’s face it. Everything we do in our lives is speculation due to the uncertainty of everything. Every business venture is uncertain. Buying a piece of real estate is uncertain. Even getting into your car and driving to work is uncertain. The idea of trend following is that one realizes and accepts the uncertainty and manages the risks. Without managing the risks… any speculation or even trend following is a gamble. This is not our goal to gamble but rather to compound money over time.
Some of the premises of a successful trend follower (Speculator) or characteristics of a successful commodity trading advisor are as follows:
1. Confident in the face of uncertainty
2. Self Reliant and does not seek out the advice of others. The successful commodity trading advisor has developed his/her strategy and knows it is all a numbers game and what to expect. Small losses.. Small profits.. Rare large profits…and the commodity trading advisor makes sure he/she does not have large losses.
3. Flexible- The successful commodity trading advisor has no opinion and is flexible to go long or short as price dictates. He/She knows that opinions do not translate into profits. Rather they trend follow and let price dictate which direction to trade if at all.
4. Patience- Trend following CTAs know that draw downs will occur with great regularity and that the durations of some are extensive.
5. Discipline- Trend following commodity trading advisors don’t change their methods or systems in the midst of a draw down. They are always testing ideas and researching to improve however they are disciplined to take every trade their trend following systems gives them. There is not a second thought…should I take this trade or not?
The connotation of a speculator has been slighted. Too many look to blame those that are successful. Fortunes were won by trend followers in the oil markets…and in shorting the stock indices last year (besides so many other markets). The losers were the buy and hold mutual fund owners or those that believed they knew better than the markets themselves. One stand out was T Boone Pickens the oil expert who saw his energy hedge fund implode because he did not follow price. Nothing ever really changes. Fear..Greed..Panic!
This is why trend following a large basket of commodity markets are an essential part of anyone’s portfolio. Human nature never changes!
Send For Our Free Report- If You Don’t Understand This, You Don’t Understand Trading: Enter Your Email at the Top Left of the Home Page.
Andrew Abraham
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money
7 Different Ways To Profit. Easy Conversions! Promoting These 7 Services To Niche Site Owners Will Produce Fantastic Conversion Rates. Anyone Promoting Niche Sites (AdSense, Amazon, Cj, Etc) Will Benefit From These 7 Services. Target Them And Profit!
BUY NOW: The Niche Marketer’s Toolkit – Advanced Niche Marketing Services.
A. It is totally set by Fed.
B. It is set exclusively by the government every quarter.
C. It is measured in terms of real income.
D. It depends on the current price level.
Recent Comments