Do You Understand Commodity Trading & Trend Following?

InvestorEducation / Learn to Trade Jul 07, 2009 - 01:32 AM GMT

So you want to be involved in Commodity trading and trend following. You realize the benefits of liquidity and transparency in commodity trading & trend following. You realize that potentially you can protect your net worth from the potential of inflation. I really should not even say potential, with all the money that was printed by governments all over the world to me it would be a 6th sigma event if it does not happen.

But, Do you really understand what commodity trading is and entails.. The same goes for trend following. Do you have a plan? Do you plan to trade for yourself or allocate to a commodity trading advisor. Firstly, I have been an AP for an introducing commodity broker for too many years to count. The fact is our brokerage business is modeled on that investors do not have the discipline to run their own systems. The brokerage is based on running mechanical systems for clients. This enforces one of the main tenants of successful trading, Discipline.
Stating the fact that most investors do not have discipline how can they stick with a commodity trading advisor over the long run. This is what I really mean when I ask the question, do you really understand commodity trading? The key of long term success is to understand there will be draw downs and they are a part of trading.

On another tangent when I am at parties or events and I am asked what I do. I used to respond that I am in managed futures. Most people did not understand that. So they I started explaining I am in commodity trading. Well they got that…but very wrongly. First of all I am ( as my wife calls me) the most obessive compulsive paranoid person walking the face of the earth. Thinking this way has saved me and kept me out of trouble. Most people who I would speak to thought that commodity trading is reckless and gambling.

I would respond to the contrary, every trade is planned out with a stop if it does not work, I realize I do not know the future nor try to predict and most importantly I manage the risk. I ask them about their mutual funds or stocks. I knew the answer before I even started.. I asked them if they had a plan (HUH??) I asked them where do they exit if the investment doesn’t work (NEVER..Stocks only go up). I ask them do they think it is possible for the stock market not to always go up (this was before last years stock market crash). People have no clue. There were numerous periods the stock market did nothing.. I mean even buy and hold lost money…

Now I start telling people I am a trend follower at events. They think I follow fads.. the latest clothing or music..Then I explain what trend following really is..
1. Looking to invest over a long period of time and compound my way to wealth.
2. That trend following works in stocks..forex..commodity trading or even fashion (haha).
3. Trend following involves realizing one does not know the future
4. Trend Following involves using systematic mechanical systems and is one of the best ways of limiting risk.

If you want to learn more about commodity trading and trend following this is the place. I do it every day. I have seen every way to lose money…and this is the way to compound wealth when investors have the correct discipline and patience.

Andrew Abraham
www.myinvestorsplace.com

Andrew Abraham has been in the financial arena since 1990. He is a commodity trading ddvisor and co manager of a Commodity Pool. Since 1993 Andrew has been a proponent of quantitative mechanical trading programs. Andrew's major concern is not only total return on investment but rather the amount of risk that one would have to tolerate in order to achieve returns He focuses on developing quant models that encompass strict risk adherence and correlation. He has been a speaker at conferences as well as an author of numerous articles. Andrew has spent years researching ideas that have the potential to outperform indices as well as maintain fewer draw downs.

Visit Angus Jackson Partners (http://www.angusjacksonpartners.com) Contact: A.Abraham@AngusJackson.com (mailto:A.Abraham@AngusJackson.com)

© 2009 Copyright Andrew Abraham - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.