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Leo,
I offer my reply to your question. I see commodity trading as true
technical analysis...the trading price is reflective of the value of
the commodity at that time. A stock's price can change abruptly simply
because some analyst downgrades the stock....not because of the
intrinsic value of the company. As Larry Williams stated, when you buy
a commodity
contract, you can take actual possession of that commodity at that
specified price. With a stock, you own a piece of paper. The
opportunity of profit is so much greater with commodities. I buy one
T-Bond contract for about $2700 margin, and control $100,000 of bonds. A
one point move over a two day period is very common. This equates to a
$1000 profit on a $2700 investment, about a 37% return for two or three
days.
Exon at $65 a share, 400 shares would cost $26000. It would take a 2
1/2 point move to equal the same dollar profit on the $26000 investiment
that one could get on the $2700 bond investment. Commodity trading
involves a higher degree of technical analysis than stocks...you can
always let a stock become a "long term hold", NOT SO with a commodity.
This longest bull market has made "experts" among many stock "traders".
I was a stock trader for over 25 years and I never returned less than
22% a year, several years had 37-40% returns. Even with a good year, the
actual dollar returns require a very large portfolio. With commodities,
a modest $25000 to $50000 account can generate very significant dollar
returns. The 90% that lose use stock investment logic, not trading
logic: with a stock, one can weather a down turn because of the asset
quality of the corporation. With a commodity, the price and the market
is correct...ALWAYS. Yesterday's price is just that: yesterday's price.
If you are right, you will be rewarded quickly. If you are wrong, you
will learn to exit VERY quickly, or else you will not be there tommorrow
I do have a significant stock portfoilio, basically high asset quality
with dependable dividends. These are investments. Commodity trading
is just like a job, you earn income to invest.
These are my opinions. This is my response to your post.
Al Taglavore
Leo Karl wrote:
>
> I haven't traded commodities since the 70's when I lost money in my
> involvement with the Goldstein-Samuelson "double option" fraud. (I
> wonder how many of you today know of, or have even heard of
> Goldstein-Samuelson?)
>
> It left a bad taste about commodity trading, to say the least, and I
> have shied away ever since. Yet for reasons I don't fully understand,
> commodity trading still has a certain "aura" for me, and I would like to
> ask those of you who trade commodities what is it about commodities that
> makes them preferable to stock trading for you. And conversely, those
> of you who trade stocks exclusively, why do you avoid commodities?
>
> I mean, when viewed objectively, one could argue that commodity trading
> is perhaps a purer form of the trading art, more susceptible to
> technical analysis than stocks. And that those of you who might be
> called "trading purists" would gravitate towards commodity trading.
> Further, I suspect -- but don't know -- that one could make just as much
> money in stocks as commodities, and that if the "90% are losers" rule is
> true about commodity trading, there must be some other motivation that
> keeps the commodity traders happily at their trade.
>
> My question is, just what really is it that makes a commodity trader
> trade commodities?
>
> Thanks,
>
> Leo
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