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Old 07-25-2008
The_Cynic's Avatar
The_Cynic The_Cynic is offline
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Trading commodities (especially currencies from the bucket shops that call themselves FOREX) is very risky and should only be used for money that you can easily afford to lose.

I know this for a fact firsthand, because I used to be a commodity broker in the 90's. Licensed series 3. For over a year I worked very hard to develop a client base. ( Mostly through cold calling), CHURN and BURN is what the business is about. My first trading, guiding clients was horrid. It was especially bad for me, because I followed my own trading recommendations. When I hit the 2 year point, after having lost a chunk of my own money and churned almost every client I signed up, I finally hit upon a winning strategy.

I noticed that in thinly traded markets, a week or two before options expiration, and then up until the exp. date, the market would move in the direction that would leave the most option holders by $$$, broke. Especially in FCOJ and feeder cattle. The reason - because the big $$ traders in the thin markets were also the option writers, so they put their weight behind screwing the max amount of people out of the max amount of $$$ by making the options expire worthless. This is especially gaulling for the little guy because most options 90% +, expire worthless anyway..

-- So to take advantage of this I moved my clients into frontrunning this tendency. After that my fortunes, and those of my clients DRAMATICALLY changed. We started making money. I gotta tell you, it was huge rush. From referrals from happy clients, I actually had potential clients calling me. (after 2 years of nonstop cold calling rejection, this was heaven)

--- Needless to say, this story has a sad ending. I had a massive 1 year + run where I could do no wrong. I got way too cocky and eventually I abandoned my system, because I was now a market guru (in my head) and I started to believe my own sales BS. Eventually this undid me, I crashed and burned not just most of my money, but most of my client's $$ too.

Oh well, live and learn.

In Feb. 2007 I was planning a nice little vacation to Vegas. A problem came up and I could not go. So, I took the money I had set aside for that trip ($2500) and opened a commodity account. Since then I have had a nice run. I have been long mostly silver and sugar using a longer term strategy. ( Minis and long term options) So far, (knock wood) , it has been a success, 4x. But the reason I have made some money this time is not my brilliance, it is just that I stumbled onto bull markets and I have been riding them in a conservative manner.

Right now I like Silver Sugar and Wheat. I think that this time next year all of those will be significantly higher.

The reasons
-- A lower US dollar ( good for silver and all other commodities),
-- The end of the massive silver surplus, The mint had to curtail silver eagle production due to silver shortages
---higher ethanol production due to long term higher oil prices ( good for sugar),

and
-- a burgeoning outbreak of worldwide wheat rust and strange weather that will harm wheat harvests.

Last edited by The_Cynic; 07-25-2008 at 10:21 PM.
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