Be wary of the man behind the curtain. He may represent the biggest company with the most powerful software, but still, you need to verify. And remember, if whatever worthwhile you are trying to accomplish was easy, everyone would be doing it and already rich. Commodity trading takes lots of practice and skill. There are no shortcuts.
I keep coming back to Max, my first broker. Let me tell you another story that taught me two lessons. About the time I made the big British Pound futures contract trade, I started to notice that my commodity account statements did not agree with what I thought the balance should be. It was off something like $3,500. I sent my paperwork showing profits and losses to Max. He said the trades seemed correct, but still, my account balance was $3500 lower than it should have been.
Max finally told me to come in and sit down with a Merrill auditor. I showed up and met a thin, balding man of about 45, with glasses and a very conservative look. I just knew he was thinking I was the typical commodity futures gambler who would be blown out in no time. He had not studied my trading records to this point.
I showed him the futures trades and he looked them over one by one. What I remember about the session is his shocked look when he realized that I was actually making money in the account! He looked at the cotton ”limit up” trade and said, “ you made $5,000 on this trade?” I tried to act like it was nothing - like it was an everyday thing and said, “yep.” I could see his eyes widen as he looked at some of the “lucky” big ones. After about 45 minutes he said he could not find an error in my paperwork and said he would credit the futures account for the full $3,500 the next day.
I learned two valuable lessons that day. The first is not to trust any commodity account statement. As good as our computerized world is today, there are still mistakes being made. It can mean having wrong trades put into your account or not receiving them at all. Errors can be more numerous when day trading since many trades come and go quickly.
The second and most important thing I learned is that most new and inexperienced commodity futures traders lose and blow out their accounts. It’s just a matter of time before the commissions, bad analysis, ego generated mistakes, order mistakes, over-trading and everything else reduces the account to nothing. I realized this when the auditor was stunned that I was actually making money with Max. Later I found this to be the case in the real world. The statistics in stock trading are no different. Futures trading is not unique in this regard.
Hey, I’m not the greatest commodity trader either. I still struggle with the trading triangle every day. But you and I don’t have to be the best trader in the world to make money - only better than most. Perfection is not required.
Most commodity futures traders are reckless with their trading. Many just guess or look for tips. They come, play for a few months, get blown out and never come back. Then a new group comes in and the cycle repeats. Only a small percentage hang around long enough to learn how to break even. Even that is a big accomplishment. Later with persistence, learning and good fortune, they pull it off by making some money each year.
It’s all about the bell curve. At one end of the curve there will be some that are gone in a few days. In the middle, the majority will make a little, break even or lose a little. Then there are the superstars at the opposite end who consistently make multi-millions each year.
Probability allows for everything. Every scenario will play out eventually. If you stay focused and are willing to drop things that do not work and keep trying new ideas, you may be able to find the right combination that fits you to a ‘T.’ That’s the whole commodity futures and options game. You need to figure out your strengths and weakness. Then match up a commodity trading program where you feel comfortable and confident enough to take consistent action.
Part Two of Four - Next!
There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.
Thomas Cathey directs the managed futures division of Thomas Capital Management, LLC. Get FREE, the complete 44+ lesson, "Thomas Commodity Trading Course" by visiting: http://www.thomascapitalmanagement.com/commodity/welcome.htm It's brand new and fun reading... a "street-wise" trading e-course. Visit the main Thomas Capital Management trading website at: http://www.ThomasCapitalManagement.com