Economic comment and media hype direct and create commonly held views. Once a market believes in a commonly held view, it will eventually break sharply against that view. The size of the move in the opposite direction is a function of the level of disappointment in the coming reality. In other words, a gap forms between what public consensus expected to happen and what actually happens in reality.

By observing events, savvy futures traders can make money on the developing gap in two ways:

1. by patiently waiting as consensus builds, then acting as the break in consensus occurs, or
2. by aggressively searching for the contrary scenario that will precipitate the break.

As the public grows disenchanted with the inability of the consensus view to live up to expectations in reality, it will try to protect its investment by moving in an opposite direction. By acting at the point of greatest confusion — the point at which the market starts to turn but before it is in full retreat — can profit, often significantly. The stampede against the formerly held consensus creates a new trend which grows, building a new consensus about the correctness of this new path. Despite the stunned pronouncements of television commentators, who seem to be perpetually caught off guard, the cycle endlessly repeats, creating price points on which savvy futures traders can make money.

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.

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.

There are four basic stop loss methods:

Initial stop. The initial stop is your insurance policy against catastrophic loss. The initial stop is the pre-determined price point at which you will cut your losses and pull out of the trade. To be successful, a futures trader must have the discipline to immediately exit his position when the initial stop is triggered. There will be times when the market will rebound shortly after your exit; but far more often, your timely exit will prevent financial disaster.

Break-even stop. Break-even stops prevent you from losing more than your initial buy-in. Once your trade moves above your entry price, a break-even stop is placed at the entry point to prevent loss greater than the initial buy-in. Once you pass the break-even point, you start playing with the market’s money, not your own.

Trailing stop. Trailing stops keep your profits from slipping away. They allow you to ride a potentially profitable trade without risking your hard-earned profit. Trailing stops track the lows. As the market edges up and down in small steps, stops are placed just below each successive low. By riding the lows in a slowing rising market, you place yourself in a position to continually gain while maintaining an acceptably small level of risk.

Time stop. Time stops keep money flowing and prevent you from tying up your money in unprofitable trades. A time stop forces you to sell if a trade hasn’t reached its price objective within a set period of time, generally not more than one to two hours and usually less. Time is money. If a trade doesn’t produce, move on.

For more information on how to effectively use stop losses as a futures trader, click here to find out about my Futures Trading Secrets Course.

• 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.

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Because of the essential nature of commodities, in times of war and great turmoil, investors cling to commodities. For example, after the tragic events of 9/11, gold prices spiked as investors sought safety in the precious metal. Tragedy sends investors running to the basic, the dependable, the necessary, the things that are essential in our lives — to commodities. In times of trouble, investors consider certain commodities (particularly precious metals) to be safe havens for their money. It’s the end of the world scenario: In a devastated world without structure or law, gold will always have value. People will always be able to exchange gold for the things they need. Perhaps today the idea seems a little too Hollywood, but it persists, rooted in ancient human history throughout which gold has always signified wealth and power.

Inflation is another economic force that sends investors scurrying to buy up commodities. In uncertain times, people will always need the raw materials on which society is built and which are used to provide man’s basic needs — food, housing, clothing, transportation. While other sectors of the market languish as inflation rises, commodities will flourish. Gold, in particular, spikes during times of inflation. Because gold is the standard on which the world’s currency values are set, investors see gold as the ultimate hedge against inflation.

Commodities will not necessarily follow the stock market during times of economic pressure. Generally, commodities do well in periods of late expansion and early recession. As the economy slows, interest rates drop in an effort to stimulate the economy (witness the Fed’s slow but steady drop in interest rates over the summer and into the fall in response to the home mortgage and credit crisis). Low interest rates spur commodity growth.

It is important to remember that business cycles are not exact and cannot be predicted with definite accuracy. But they do provide a historical perspective that futures traders can use to evaluate commodities markets. It is also important to realize that not all commodities follow the same cycle (wheat may peak in the spring; oil, in summer). At any particular time, however, futures traders can usually find rising and falling commodities from which they can profit. Understanding what drives the economy and how those forces impact commodities gives futures traders important information they can use to take advantage of and profit from movement in the commodities markets.

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

In current years, commodities have out-performed stocks. From 2002 to 2005, the Dow Jones Industrial Average returned a respectable 7%. During the same period, the Dow Jones-AIG Commodity Index increased a whopping 21%!

Risk is a matter of perception and knowledge. People (and investors are just folks) fear what they don’t know or understand. That’s where the commodity market gets its bad rap. Most investors just don’t know enough about commodities or how they work so they avoid them. Futures traders who take the time to learn about commodities and come to understand commodity markets gain an open playing field with plenty of room to maneuver.

What are the real risks in trading commodity futures?

Geopolitical risk. One of the greatest inherent risks in trading commodities is that the world’s natural resources are tied to physical geography which has been parceled out and is controlled by various world governments or sometimes by international companies. In order to access natural resources, companies must deal with and are often at the mercy of various foreign governments. The complexity of taking natural resources out of the ground and turning them into usable products is intense. Each government imposes on the process its own set of laws, way of doing business, cultural customs, tax structures, environmental concerns, employment requirements, technology network, etc.International disagreements over the control of natural resources are commonplace. Foreign developers can be unceremoniously booted out by the host country, losing their entire investment. If a country chooses to nationalize an industry — as Bolivia nationalized the natural gas industry in 2006 — the foreign developer loses everything in the blink of an eye, and has no recourse for reimbursement of his considerable investment.It’s difficult to protect yourself from geopolitical risk, but it pays to remember that in commodities, size matters. The bigger and more experienced the company, the more likely it is to succeed. Futures traders can use this information to determine probable risk.
Next time: Additional risk factors and how to manage risk.

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As we enter a new year, I find these words from the Daily Motivator of particular import to my life as a futures trader. More than anything else, your daily attitude affects your ability to perform successfully as a futures trader. If you stay positively focused, you will be able to assess your position will confidence and pull the trigger at the precise moment to ensure maximum profitability. Allow negativity or self-doubt to eat away at your confidence and you will fail.

Everyone has the occasional bad day. But whether it’s a trading loss or a crisis in your personal life, you can’t let feelings of negativity engulf you. You have to “shake it off,” “get back on the horse, “get back in the game.” Hackneyed though the sayings may be, they carry a large truth. The only way to succeed is to refuse to allow yourself to be beaten down. You have to maintain faith in yourself and confidence in your ability to succeed. You have to stay positive.

There are many ways to renew your positive energy each day. I enjoy a brisk walk or run in the early morning. The exercise recharges my physical batteries and participating in the beginning of a fresh, new day revitalizes my spirit. Exercise, daily motivations and personal affirmations are all ways to recharge your positive energy before you tackle a new trading day. Experiment, discover the activities that keep you positively motivated, and make them a daily part of your life. The more positive energy you can maintain in your life, the better trader you’ll be.

Ralph Marston ends his December 22, 2007 Daily Motivator with a thought I’d like to pass along to all of you:

“Whether it’s through your actions or through your attitude, there’s always a way to introduce a more affirmative perspective into your life. Stay focused on the positive possibilities and life will continue to grow more richly rewarding.”

My best wishes for a brighter, happier, more profitable 2008!

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What do we mean when we say, pulling the trigger? It’s trader talk for act. It’s the ability to put into action what your indicators are telling you, all you’ve learned about trading, and what you know from studying the market. The tremendous preparation that goes into becoming a successful futures trader is all for naught if you can’t act. Futures trading is all about pulling the trigger. If you don’t play, you can’t win. And futures traders play to win!

The savvy futures trader knows when to pull the trigger. Acting precipitously won’t get you anywhere. You pull the trigger when your chart indicators hit — generally based on the one or three-minute stochastics. When you pull the trigger, there are three ways to time your entry, or aim the bullet. The timing you choose has a lot to do with your risk tolerance.

• Early entry involves some wiggle. You balance the risk of the wiggle against greater potential gains. You want to time an early entry as close as possible to an exhaustion point and just ahead of a reversal. Since you’ll be going against the crowd at the start, expect an early entry to move away from you initially. You can mitigate the risk of an early entry with smaller trades. Early entry generally gives you the greatest possibility for gain.
• Enter in a positive position right at the moment of greatest impact and you’ve hit the sweet spot. The window for this entry is exceedingly small so you have to be on your toes to catch an entry at the sweet spot.
• Late entry carries the greatest risk. Made at exhaustion levels, a late entry can reverse fast and is for those searching for extended leandowns to make a last-ditch push. However, a critical make or break scenario can trigger a profitable late entry. As a rule of thumb, you should limit late entries. Late entries come nearly at the point of reversal. When you enter late, you gamble that the reversal will come later rather than sooner — a risky venture.

There are critical charting indicators that can be used to find the most lucrative entry point and tell you when to profitably pull the trigger. In my Futures Secrets Trading System course, I show you how to set up your system, develop your charts and recognize the indicators that tell you when to most profitably make your entry. I show you everything you need to know so that you can pull the trigger with confidence.

1. Discipline. Discipline is the primary key to successful futures trading. You must have the discipline to learn your system, study it daily and tweak it to perfection. You must have the discipline to keep a trading log that records your trades, as well as the market conditions, thought processes and external influences that affected each trade. Without such a log, you are doomed to repeat your mistakes, rather than learning from them. You must have the discipline to do your homework, to study and keep up with the market, to keep your system current.
2. Patience. You must be patient if your trading system is to be effective. By trading too soon, you negate the value of your trading system. You must exercise patience and give your system time to work.
3. Loss. Loss is part of the trading game. You must be able to take losses in stride and get right back in the game. When your system dictates that a loss be taken, you must have the discipline to follow your system, take the loss quickly, minimize the damage and move on.
4. Perseverance. There are no overnight success stories in futures trading. Success is a matter of building experience, working and perfecting your system, minimizing losses, and capitalizing on small gains. Success, particularly at the beginning, is more often a series of small steps than giant leaps.
5. Confidence. Above all, a futures trader must have confidence in himself. You must have confidence in your system and your ability to work your system — to pull the trigger. Futures trading is a game of risk. You can’t be afraid to act. You must have confidence in your ability to read your system and act. Those who hesitate are doomed to lose in the futures trading game.
6. Flexibility. The market and market forces are ever-changing. You must have the flexibility to change with the times, to make changes to your system so it remains viable and in tune with current market conditions.

1. Self-confidence
2. Discipline
3. Ability to handle loss
4. Profitable trading system

Self-confidence. If you aren’t confident that you can become a successful futures trader, you might as well pack it in now and save yourself a lot of grief. Successful futures traders are bold, aggressive and self-assured. They do not lose faith in themselves when they lose. They have the courage and self-confidence to keep trading. Futures traders are risk takers. We are the Mario Andrettis of Wall Street.

Discipline. If you cannot maintain self-discipline, if you let emotion rule your decisions, take your money and run before you lose it. Successful futures traders are highly disciplined, consistent and rational. They do not allow themselves to be distracted by extraneous information. They have the ability to dispassionately evaluate their system, knowing when to stick with it and when to change what isn’t working. Futures traders are cool and collected. We are the James Bonds of Wall Street.
Ability to handle loss. If you can’t handle loss, if you are easily frustrated by loss, or if you can’t afford to lose, get out before you gamble away the mortgage money. As a futures trader, particularly in the beginning as you hone your system and skills, you will lose. Successful futures traders are not flustered by loss. They do not panic when they lose. They do not abandon their system at the first sign of loss. In futures trading, the nature of the beast is that sometimes you lose. Futures traders learn from their mistakes, build on the lessons loss teaches, remain confident in the face of loss and work to keep their losses small so that, overall, they win. Futures traders are not defeated by loss. We are the Lance Armstrongs of Wall Street.

Profitable trading system. If you don’t have a trading system that has proven to be consistent and profitable, no amount of ability is going to make you a successful futures trader. You must have an effective conduit for that ability in order to succeed as a futures trader. An effective trading system is essential to your success as a futures trader. Futures traders are only as good as they system. For complete information on my Futures Secrets Trading System, click the link. Read testimonials from satisfied clients, now successful futures traders themselves. Find out how my Futures Secretes Trading System course can teach you how to pull the trigger. Click here for details on Futures Trading Secrets.