So here’s the question: If futures trading is so risky, why do I and so many others choose to take that risk? The answer is simple: Money. Trading commodity futures may be risky, but there is potential for enormous profit. Some of the world’s greatest fortunes have been built around commodities:

• Banking patriarch Mayer Rothschild amassed a fortune during the Napoleonic Wars by hoarding and distributing gold bullion to fund the British.
• John D. Rockefeller, Sr., in his day, the richest man in America, built his impressive fortune on oil, forever changing the global oil industry through creation of the Standard Oil Company.
• Self-made steel magnate Andrew Carnegie consolidated the American steel industry, founding the company that would eventually became behemoth U.S. Steel and in the process accumulating a fortune second only to Rockefeller’s.
• Abdel-Aziz Al-Saud, the first king of Saudi Arabia, created a nation and amassed unbelievable personal wealth through consolidation and control of crude oil and natural gas.
• Lakshmi Mittal, the Indian steel magnate, used his knowledge of the steel industry to become the fourth wealthiest person in the world in 2004.
• In 2005, legendary oil man T. Boone Pickens made a cool $1.4 billion betting on the price of oil and natural gas.

Most of us who trade commodity futures will never reach the storied peaks of the world’s legendary commodity kings, but there are plenty of commodity traders who have made a very nice pile through steady trading. There is plenty of “gold” to be found trading futures on the commodity markets. All you need to do to build your own fortune is to consistently make more than you lose.

With the right system, the right signals, the right tools, the right attitude and some patience and persistence, you can “win” as a futures trader. I’ve already done it and I can show you how. If you want to learn the skills you need to succeed as a futures trader, click the link for complete information on my Futures Secrets Trading System. Read testimonials from satisfied clients, now successful futures traders themselves. Click here for details on Futures Trading Secrets.

• Agricultural products. We use agricultural products to feed and clothe ourselves.
• Metals. We use metals to build tools and weapons to improve our existence and protect ourselves.
• Energy. We use energy — coal, gas, oil, etc. — to warm our homes and power our factories.

The history of commodities parallels the history of mankind and development of civilization. Man’s survival and development are tied to his ability to harness natural resources. Throughout history, civilizations and nations have thrived or perished based on their ability to cultivate agricultural products, develop metals and harness energy. In fact, the early ages of man — the stone age, the bronze age, the iron age — are defined by man’s ability to utilize increasingly complex natural materials to make tools and weapons. Survival depended on man’s ability to process increasingly complex metals in order to compete against and/or trade with his neighbors.

Nations have been founded and civilizations destroyed over the control of natural resources. In 1524, Francisco Pizarro’s Spanish conquistadors destroyed the entire Inca civilization in a vicious campaign to corner the South American gold market. In the late 1800′s, the British fought the bloody Boer War over control of South Africa’s gold and diamonds. The Persian Gulf War precipitated by Iraq’s invasion of Kuwait was essentially fought to stabilize global oil markets. Global economists and environmentalists predict that the world’s next great war will be fought over control of essential natural resources — water and arable land — made scare by the effects of global warming.

Throughout history, the fate and wealth of nations has been dictated by the presence and control of natural resources. This will not change and presents opportunities from which savvy futures traders can profit.

For more information, 11 free trading lessons and a free ebook, visit Futures Trading Secrets.

Futures traders are players and the game they play is fast paced. To succeed as a futures trader you must have self confidence, discipline, patience and quick reflexes. You need those quick reflexes to keep track of the many variables that affect the futures markets and, therefore, influence your buy/sell decisions. Among the more important variables you must track are:

• Underlying asset. A futures contract is based on an underlying asset. Most often assets are physical commodities. As we’ve discussed in recent posts, commodities are natural resources, so the underlying asset could be crude oil, soy beans, gold, sugar, etc. However, futures contract can be used to trade all sorts of assets, such as interest rates, indexes, currencies, equities, even the weather! Different commodities are traded on different exchanges. For example, the Intercontinental Exchange (ICE) trades crude oil, electricity and natural gas while the Chicago Board of Trade (CBOT) trades corn, ethanol, gold, oats, rice, silver, soybeans and wheat. Before you trade, be clear about the asset you want to trade and, particularly, about the exchange you want to trade on. Some assets are traded on more than one exchange. For example, wheat is traded on CBOT, the Kansas City Board of Trade (KCBT) and the Minneapolis Grain Exchange (MGE).
• Underlying quantity. The contract size, or trading unit, specifies the amount of the underlying asset covered by the contract. Futures contracts are highly standardized and specific to each exchange.  For ease of trading, the size of one futures contract is predetermined and fixed by each exchange. For example, one futures contract of frozen pork bellies traded on the CME equals 40,000 pounds of pork. One futures contract of light sweet crude oil on the NYMEX equals 1000 US barrels, or 42,000 gallons. Before you purchase a futures contract, make sure you know the exact amount of the underlying asset represented by the contract. Due to the influx of individual investors into the futures markets, many exchanges offer smaller sized contracts — minis. For example, one futures contract for light sweet crude oil traded on the NYMEX miNY is 500 barrels, half the quantity and, therefore, half the price of a traditional contract. For this very reason, I recommend trading the e-minis.

Next time, we’ll talk about more of the variables futures traders have to juggle as they make trading decisions.

• Commodities are a class of assets that includes energy, metals, agricultural products, natural gas and oil, and other natural resources. Commodities are natural resources, actual physical objects with an inherent value of their own.
• Futures are investment vehicles through which you invest in commodities. Futures can also be used to invest in other asset classes such as currencies, bonds, interest rates, stocks, indexes, etc. Futures have no value in and of themselves. They are known as derivatives because they derive (or take) their value from the underlying financial instrument (i.e., the commodity, currency, stock, etc.)

We use futures to invest in or trade commodities. In a futures contract, two parties agree to buy and sell the underlying asset (i.e., a physical commodity such as corn, wheat, oil, etc.) at a mutually agreed price at a specific time in the future. Most futures traders never intend to take physical possession of the commodity they are trading. In fact, of the billions of futures contracts traded on commodity futures exchanges every year, somewhat less than 2% result in the physical delivery of a commodity. Futures traders trade contracts back and forth to hedge or speculate on the price movement of the particular commodity that is the underlying asset of the futures contract. Their goal is not to own the commodity, but to make money on changes in the price of the contracts they are buying and selling.

At the beginning of the 1848 Gold Rush, Sam Brannan, who owned a general store in Sutter’s Fort, discovered that John Sutter and James Marshall had discovered gold. Understandably, the discoverers wanted to keep the strike a secret. Brannan agreed, then quietly scoured northern California buying up every shovel, pick and pan he could find until he had cornered the market. He then went around town yelling, “We found gold!” and the Gold Rush was on. Hundreds of people flocked to northern California, all needing shovels, picks and pans to search for gold. And there was Sam, the only source for hundreds of miles around! Sam Brannan never lifted a shovel, never swung a pick, never shifted a pan in the search for gold, but he became the first millionaire of the Gold Rush — selling shovels.

There is often more than one way to profit from commodities. Money can be made not only by betting on the need for resources, but on the processing and transporting of those resources. Remember that futures trading is global. Creative thinking requires that you consider the need for resources in one part of the world and probable suppliers and processors who may be located in other parts of the world.

In thinking creatively about commodity futures markets, factor in the following and see where it leads you:

• Population. We are at the start of what is expected to be the greatest explosion in population growth in human history. The United Nations estimates that world population will increase by 1 billion people per decade for the first five decades of the 21st century. That means that the number of people on our planet will increase from 6.5 billion today to 9 billion by 2050. Population growth has become exponential. In the 19th century it took 130 years to add 1 billion lives to the planet. Barely 200 years later in the 21st century, it takes just 13 years. More people means greater demand for natural resources (i.e., commodities). Greater demand means rising commodity prices.
• Urbanization. People need a place to live and are increasingly being lured to cities where the bulk of the world’s jobs can be found. The exponential growth in population is being accompanied by the greatest increase in urban development the world has ever seen. In the early 20th century, less than 15% of the world’s population lived in cities, according to United Nations statistics. In 2005, 50% of the world’s population lived in cities. By 2030, the U.N. predicts that 60% of the world’s people will be crowded into cities. People in urban areas consume more natural resources than those in rural areas where life is more sustainable. As urban areas expand, more natural resources and industrial metals will be needed to provide the necessary infrastructure: houses, roads, buildings, cars, hospitals, schools, etc. Whereas cities may have been initially located near plentiful natural resources, the mega-cities of the future may require resources from across the globe.
• Industrialization. In the 19th century, the first industrial revolution transformed Western Europe and North America. While industrialization has slowly been creeping across the globe during the past century, we are now poised for a second major industrial revolution in what are called the BRIC countries: Brazil, Russia, India and China. The need for natural resources in these countries is enormous and rising fast, pushing up commodity prices as demand rises. In the next few decades, China is expected to become the world’s largest consumer of commodities. In 2004, China used half the cement, a third of the steel, a quarter of the copper and a fifth of the aluminum produced in the world and was second only to America in oil consumption.

For more information, 11 free trading lessons and a free ebook, visit Futures Trading Secrets.

So here’s the question: If futures trading is so risky, why do I and so many others choose to take that risk? The answer is simple: Money. Trading commodity futures may be risky, but there is potential for enormous profit. Some of the world’s greatest fortunes have been built around commodities:

• Banking patriarch Mayer Rothschild amassed a fortune during the Napoleonic Wars by hoarding and distributing gold bullion to fund the British.
• John D. Rockefeller, Sr., in his day, the richest man in America, built his impressive fortune on oil, forever changing the global oil industry through creation of the Standard Oil Company.
• Self-made steel magnate Andrew Carnegie consolidated the American steel industry, founding the company that would eventually became behemoth U.S. Steel and in the process accumulating a fortune second only to Rockefeller’s.
• Abdel-Aziz Al-Saud, the first king of Saudi Arabia, created a nation and amassed unbelievable personal wealth through consolidation and control of crude oil and natural gas.
• Lakshmi Mittal, the Indian steel magnate, used his knowledge of the steel industry to become the fourth wealthiest person in the world in 2004.
• In 2005, legendary oil man T. Boone Pickens made a cool $1.4 billion betting on the price of oil and natural gas.

Most of us who trade commodity futures will never reach the storied peaks of the world’s legendary commodity kings, but there are plenty of commodity traders who have made a very nice pile through steady trading. There is plenty of “gold” to be found trading futures on the commodity markets. All you need to do to build your own fortune is to consistently make more than you lose.

With the right system, the right signals, the right tools, the right attitude and some patience and persistence, you can “win” as a futures trader. I’ve already done it and I can show you how. If you want to learn the skills you need to succeed as a futures trader, click the link for complete information on my Futures Secrets Trading System. Read testimonials from satisfied clients, now successful futures traders themselves. Click here for details on Futures Trading Secrets.