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Friday, January 10, 2014

A Proven Method for Producing Cash without Losing Your Shirt

Shake Your Money Maker!

A Proven Method for Producing Cash in a Nonstop Market without Losing Your Shirt

7:10 AM

Dear Entrepreneur:

This business has made some people very rich, including myself.

Most people don’t think of the commodity markets as a business. 

But believe me, if you approach this market as a business you’ll probably make (and keep) more money.

You CAN and WILL lose money in this business.

My first few trades were horrendous. On one trade I lost about $1,000. I thought my trading career was over!

After my third year in this business I took a break with my family and we traveled for 6 months. I was debt free, with a nice bank account and I owned my homes free and clear (still true).

Anyway, I won’t bore you with ridiculous theories or sell you something you MUST to be a success in this market. 

But I’ll be brutally honest with you. 

Don’t kid yourself….this business is not for everyone. 

On top of that, there are risks involved and you can lose a heck of a lot of money too. 

But I’ll show you how to reduce risk and approach this business like a seasoned professional.

Let’s get to it!

The good news… 

The commodity market is a multi-trillion dollar global cash machine.
Contrary to what most people think, you won't lose your shirt if you approach this market like a (successful) professional trader.

The money-making potential of this business is unlike anything you have ever seen before.

I started trading commodities from the local library, and eventually from a back bedroom in my home. 

You can trade commodities from anywhere in the world. 

You can do this from a PC, laptop, iPad or iPhone or with no computer or Internet connection….but obviously, almost everything is done online today.
I've even traded commodities at 35,000 feet on a flight from Chicago to Boston.

It doesn't take a lot of money to open an account either. 

Most commodity brokerages require an initial deposit of $5,000, but some require only $2,500 if you trade “mini” contracts (about the tenth of the size of standard contracts)

But let’s get real… 

You may need more than a minimum deposit in your account.

If you don’t want limit your downside risk and eliminate the need for a margin account then consider trading exchange-traded funds or ETFs. There are hundreds of ETFs which trade commodity markets.

Marc’s Commodity Cheat Sheet

A commodities futures contract is an obligation to buy or sell a given quantity of a particular asset at a specified future date and at an agreed-upon price.
Futures contracts have standard delivery dates, trading units, terms, and conditions. 

And they can be based on any number of underlying assets. 

Futures contracts are available for every conceivable market including: stock market indices, bonds, interest rates, coffee, sugar, orange juice, cocoa, oil, natural gas and dozens of agricultural commodities.

You can "open" a futures position by either buying or selling a future. 

You can "close" a futures position by doing the opposite - either selling or buying the same future. 

In practice, most futures contract positions are "closed out" before they expire. 

If you hold a commodity futures contract to the expiration date, you would have to take physical delivery of that commodity, or settle in cash. 

Obviously, most commodity traders have no interest in the physical asset. Most traders are looking to make money over the duration of the trading period.

If you believe that the price of the underlying asset will rise, you would buy a futures contract - taking what is known as a long position. 

A long position commits you to take delivery of the underlying commodity, or equivalent cash value, at a prearranged price and by a certain date.

On the other hand, if you believe that the price of the underlying asset will fall, you would sell a futures contract - taking what is known as a short position.
A short position commits you to deliver the underlying shares, or equivalent cash value, at a prearranged price and by a certain date.

As with the stock market, you can place "stop-loss" orders above or below your entry points to make sure you lock in profits when the market rises or limit your losses when the market falls. Stop loss orders are a great tool for limiting risk and locking in profits, I’ve always used them.

The best futures contracts are traded on government-regulated exchanges such as Chicago Board of Trade (the largest futures exchange), the Chicago Mercantile Exchange and the Intercontinental Exchange or ICE.

You’ll find commodity exchanges in most industrialized countries.

An "Insider" Commodity Trading Strategy Used by the Pros

Amateur traders typically trade like they're on a weekend trip to Las Vegas.
Amateurs become excited when they have a big winning trade (I was in this group when I started out too!).

As a result, amateur traders don't know when to stop or remove profits.

Successful traders on the other hand don't get emotionally charged after a winning trade. The most successful traders I’ve spent time with approach the market with a calm assurance. 

Okay…let’s take a look at a hypothetical trade in the corn futures market. 

Corn futures are one of the most popular agriculture commodities. (Other “ag” commodities include soybeans, soybean meal, soybean oil, wheat, rice, oats, and barley.) 

Each corn futures contract on the Chicago Board of Trade consists of 5,000 bushels. The deposit (or margin) to control this contract is around $500 (give or take a few dollars).

Every time the price of corn moves one cent in the futures market, the value of the futures contract increases or decreases by $50 USD. 

For example, if the price of corn on the futures market closes up five cents this means the value of one corn futures contract would increase $250. 

If you bought one corn futures contract when the market opened and sold it after the contract had gained five cents you would have made $250 (less any exchange or brokerage fees). The corn market is fairly predictable and usually trades within a 20-cent range. 

Okay, on to our hypothetical trade……

The most important aspect to this “insider’s” strategy is to limit the amount of contracts you hold, systematically remove profits…..and perhaps the most important thing…start over again small.

So let’s say we purchase one corn futures contract at the market (prevailing price). 

The contract closes up 10 cents on the first day. But let’s say we hold it and don't sell. 

Over the next few days, corn futures close up another 20 cents – and now we decide to sell it.

In this scenario, you would have made $1,500 (30 cents x $50 = $1,500).
But instead of celebrating we continue with our strategy. 

Important Tip: There are basically two ways to approach the commodity markets. If you Google this you’ll see its true. You can base trades on a technical or a fundamental point of view. A technical view is the use of charts, cycles, Elliott Waves, and mathematics etc. A fundamental view is on opinion based on supply, demand, weather, and crisis, etc. If you can use both approaches so much the better.

Okay, let’s get back to our example…

After you sell the one corn futures contract, the next step is to buy two corn futures contracts. 

This may sound confusing but it’s not!

The idea as I said is to trade through a series of four trades. In other words limit the number of contracts you hold.

If you draw this strategy on a piece of paper it would look like an inverted (upside down) pyramid

It would look something like this
Buy 1 contract - and then sell it
Buy 2 contracts - and then sell them
Buy 3 contracts - and then sell them
Buy 4 contracts - and then sell them (Level 4)
Remove profits and start over again small

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