Why is commodity trading so risky,best online stock trading comparison,best algorithmic trading platform - Try Out

27.04.2015 admin
But the mantra ‘futures trading is risky’ isn’t just something that gets thrown about haphazardly – it’s the rules. So when we read Mike Dever’s Jackass Investing book with its 20 myths about investing, and came across Chapter 12 “Myth: Futures Trading is Risky”, we looked over our shoulders to see if the regulators would coming knocking on our doors.
Turns out, Dever is making a more nuanced point that futures trading is risky, but futures investing, via managed futures – need not be any more risky than the stock market or other investments. So the question the book explores isn’t really – is futures trading risky or not, but rather – is managed futures, as an asset class, more or less risky than stocks. Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. The entries on this blog are intended to further subscribers understanding, education, and - at times - enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex.
The performance data for various Commodity Trading Advisor ("CTA") and Commodity Pools are compiled from various sources, including Barclay Hedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. Wilson Wan, the head of China Merchant Securities (Hong Kong), is establishing a new unit for oil futures trading, focusing on the three mainland oil majors. While Western financial giants have been exiting the high-risk, high-reward commodities trading business, capital-rich Asian firms, including state-owned banks and brokerages from China, have seized the opportunity to enter the market. The latest example is China Merchants Securities (CMS), which launched a wholly owned subsidiary in Britain to expand into the global capital and commodities markets, with a focus on derivatives trading.
Earlier this month, JPMorgan surprised the market by announcing a plan to sell its global physical commodity assets.
Wan said his focus would initially be on commodities futures trading, but he would not rule out the possibility that the firm would seek business opportunities in physical gold in the near future. The London-based trading platform of Standard Bank is well known in the industry for its global investments in oil, copper and other raw materials. Commodity future trading is considered by many investors as a risky way of trading, but if you know how to go about it, it can be just as profitable as any other kind of trading in the financial markets if not more.

Commodity future trading will not make you rich overnight, so don’t invest your money and picture that new Ferrari just yet. Asked about Sebi's preparedness for regulating the commodities market and his assurance to the investors, UK Sinha said Sebi has got more than 15 years of experience of managing and regulating the derivatives trading.
Sebi, which expects the merger of commodities market regulator FMC with it to be completed by next month, will soon put in place a new set of regulations for this segment and the restrictions, including for trading lot sizes, would also be implemented to ensure safety of the small investors.
Sinha said his message to the small investors would be to keep away from the commodities market as it was meant for the experts and for those seeking to hedge their risks. Announced by Finance Minister Arun Jaitley in his Budget for 2015-16, FMC’s merger with Sebi will help streamline regulations and curb wild speculations in commodities market, while facilitating participation of domestic and foreign institutional investors and launch of new products. At present, there are three national and six regional bourses for commodity futures in the country.
Asked about Sebi’s preparedness for regulating the commodities market and his assurance to the investors, UK Sinha said Sebi has got more than 15 years of experience of managing and regulating the derivatives trading.
The Sebi chief said it requires a lot of technical knowledge to understand the commodity derivatives market and it involves a lot of risk. In the beginning, FMC was only regulating regional commodity exchanges and its role was expanded after the emergence of national electronic trading platform in 2000. He further said Sebi will put all necessary regulations and requirements in place for trading.
Any futures broker registered with the National Futures Association is required to inform those they are prospecting that Futures Trading is indeed risky and that it isn’t suitable for everyone. While those of us in the business of professional futures trading, aka Managed Futures, may think from time to time that futures trading is no more risky than the stock market, if done with proper risk management – we’re not about to put it in headlights as the chapter of a book!
For our own regulatory protection – we’ll still tell you that there is the risk of substantial loss in both futures trading, and futures investing!
To tackle this, Dever presents readers with a sort of blind taste test of two investment returns and risks, and asks which they would rather invest in.

The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. If you think that commodity future trading is too risky, consider that all trading is open to risk, and also the fact that the higher the risk, usually the higher the return.
Here is how it works; the giants in commodity trading are also working these high margins, and because they have money, they can manipulate the way things work out. Do not fall into the trap,” Sebi Chairman U K Sinha said, even as he asserted that the capital markets watchdog was fully prepared to begin regulating commodities trading and all necessary safeguards would be put in place to keep the scamsters and manipulators at bay.
The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA. There are tips that can make it less risky for you, so that if you take a fall it won’t be too bad.
It takes a lot of experiences to eventually get wealthy from trading commodities, so be ready to learn and be ready to spend some time.
Also, be careful not to trade so many contracts that you don’t have a balance left in your trading account. Many newbies in commodity future trading will tell you that they started with so little that the first loss wiped them out. So do your own research and ascertain for yourself what the risk looks like in the futures trading you are entertaining, and how that risk stacks up against more traditional investment methods.

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