Why Trading Commodities And Futures Is So Risky
Commodities trading should be restricted to those who’ve made at least $ 1 million in the stock market. That rule would save many lambs from being badly fleeced. Unfortunately, anyone with a few thousand dollars to invest is welcome to risk ruin in commodities markets.
Commodities, also known as futures, includes a wide variety of products from gold and silver to live cattle, wheat and currencies. Generally speaking, the major agricultural commodities markets are in Chicago. The main currencies and financial markets are in New York.
All participants in commodities markets are either hedgers or speculators. Agricultural hedgers include large farm operators and food makers, hedging against the possibility of big price changes in commodities such as wheat, corn, live cattle etc. Financial hedgers include large investors and portfolio managers seeking to protect the value of their portfolios against major currency and/or market changes.
Speculators seek to profit by accurately predicting the future prices of commodities. At first glance, commodities speculation may seem attractive. Margin requirements are typically low in comparison with the stock market. For instance, for a $ 5,000 margin deposit, you may be able to buy or sell a commodities contract worth $ 50,000 or more. Moreover, no interest is charged on the balance of the contact’s value. Thus, if you are correct in your price predictions, profits can be huge. Alas, so can losses, and losses are far more likely.
You can lose $ 100,000 (or many times that amount) in the blink of an eye in commodities. In many commodities positions, potential losses are unlimited! Since your margin deposit covers only a small part of the contract’s value, your losses could far exceed your margin deposit, even with a fairly minor price move against your position.
Here are two (of many) additional factors which make commodities markets so risky:
1. Commodities markets are a true zero sum game. In the stock market, it is possible to profit by buying, selling or simply holding a stock for a long time. In commodities markets, every dollar made by one trader is taken from another. If the seller wins, the buyer loses. If the buyer wins, the seller loses. When you account for brokers’ fees, commodities is even less than a zero sum game. In other words, you’ve got to outsmart your competitors head to head to profit in commodities.
2. The second additional factor, making commodities so risky, is that your direct, head to head competitors include some of the world’s biggest and smartest investors. An average person wouldn’t expect to win a boxing match with an international heavy weight champion. Why should they expect to win competing against the likes of George Soros, Warren Buffet and other heavyweight investment champions? You may not see you financial competitors, but that doesn’t make them any less real.
Most likely, you should avoid commodities markets like the plague.
★ Personal Consumer Loan Story: “I Got Control Over My Finances and My Life”
www.AssociationForInstallmentLending.org The Foundation for Safe and Responsible Lending Consumer installment loans, long considered the foundation for safe and responsible lending, are in vogue again. This proven money management practice for personal debt is based on sound financial principles and good insight into human nature. Personal installment loans are a transparent, affordable and disciplined form of credit which helps consumers meet important economic needs. In critical circumstances, these loans also help smooth out income fluctuations and disruptions from unexpected events like car repairs or medical expenses. An installment loan provides a properly structured and timely repayment schedule based on an individual’s actual ability to pay. It also inherently creates the satisfaction associated with achieving important financial goals through the practice of personal responsibility. Protecting Consumer Access to Responsible Credit Consumers Making Good Decisions for the Right Reasons The Same As It Was Over 100 Years Ago With traditional installment loans, the process today is the same as it was over 100 years ago. The industry provides high quality loans in a strongly regulated marketplace with all appropriate consumer protections—without having to rely on taxpayer subsidies. Clearly, it is imperative to keep a healthy, diversified private enterprise consumer loan industry available in this country. When lending is available through private enterprise, we …
personal loans Video Rating: 0 / 5
personal loans – click on the image below for more information.
List Price: $ 19.95
Price: $ 16.40
Most of us dream of retirement as the time in our lives when we’ll finally be able to do what we’ve always wanted to do – but why do you have to wait? Rethinking Retirement helps you create the life you want now. By challenging traditional notions of how our lives are “supposed” to go, former financial advisor Keith Weber offers a new path for creating freedom, balance, purpose and passion in your life. Recounting his own “wake-up call” experience as well as those of many of his clients, Keith will help you: Recognize your true priorities. Define a clear vision of the life you want. Recognize the true role of money in your life. Use the financial and personal resources you have to make that life real. Rethinking Retirement is packed with engaging stories, insightful self-discovery exercises and practical, down-to-earth financial education and advice. For the next generation of retirees and those already retired, Rethinking Retirement will help you create a richer and more rewarding l
Rethinking Retirement – How to Create the Life You Want Without Waiting to Retire
Click on the button for more personal loans information and reviews.
Category: Personal Finance