Finance Tips

What is your risk tolerance? Most people that I know don’t think about risk tolerance, this is why they do not even know where this threshold is in commodity trading. The fact is most people actually hate to lose money no matter how small the amount is. This is one of the reasons that many want to be commodity traders never succeed. There are commodity trading systems that tout 70% accuracy or even more. This has nothing to do with long term success in commodity trading. The fact is when trading commodities or managed futures you will experience countless losses. The goal of any commodity trading advisor or a commodity trading system is to keep these losses small. As long as they are small…they will be set off by small profits and rare big profits. To clarify further regarding risk tolerance when commodity trading…could the question be, “Do you understand the different types of risk?”. What do you mean by the ‘different types of risk’ you may ask? Well, in my opinion there are at least two types of risk. The ones that are predictable and the ones that are unpredictable. In Commodity trading anything can happen…This is the idea of 6th sigma events that are totally not expected. On the other hand…..Predictable risk in commodity trading or stock market trading includes risk that has a known probability of occurring. For example, if you are a stock market investor there is a probability that certain events may change the current direction of the stock market. A change in Federal Reserve Policy might be this type of event. Unpredictable risk however, includes events that have an extremely low probability of occurring. Nevertheless they have been known to happen. An example of this is 9-11. No one expected terrorists to fly commercial airplanes into the World Trade Center, but they did. As system traders in the commodity futures markets, we have to be aware that we cannot quantify the unpredictable events neatly into a back-test. We must keep in mind that those unexpected risks, however unlikely, do occur. The future is just as unpredictable as the markets. Therefore as traders, we must learn to always expect the unexpected if we want to stay in business… I was at a commodity trading advisor conference and heard this statement… As commodity trading advisors we always must be aware of what can kill us. I thank GD that I was born with the mindset of being paranoid. To quote Andrew Grove “Only the Paranoid Survive”. Andrew Grove further states that “when it comes to business, I believe in the value of paranoia. Business success contains the seeds of its own destruction.” As commodity trading advisors that have seen virtually every way a trader can lose money ( including some ways we did) We…expect the unexpected! If you have commodity related questions please, feel free to contact me. I will be happy to answer your questions to the best of my ability. As well if you are interested I can share with you ideas that we are using. Andrew Abraham A.Abraham@AngusJackson.com www.AJpartnersinc.com Futures trading involves risk. People can and do lose continue reading…

If you pick up a newspaper, go online, listen to the radio or watch television these days, it’s hard not to catch a commercial for gold. They make some enticing claims:

“Gold has tripled in value since 2000…”

“It’s a safe haven for investors…”

“It’s outperformed the stock markets…”

“…and it’s never been worth zero.”

Historically, most of these facts are true. Go back far enough, before we placed a value on it as a commodity, it was actually worth zero: it had no value. Demand for gold – once upon a time – was so low compared to the abundance of it just ‘lying on the ground’ that it really had little or no value to anybody. Even as early as the Gold Rush, many prospectors found it lying above ground.

Here are some other very interesting facts about gold:

“You can’t eat it…”

“You can’t use it for heat…”

“You can’t make particularly good, warm clothing from it…”

“And, on occasion, governments have compulsorily recalled it.”

Therefore, in a world where the dollar is increasingly less stable and economies are still extremely wobbly, stimulus plans in the trillions of dollars are proving ineffective, unemployment is increasing at an alarming rate, and the civilized world is potentially headed back to the Stone Age, what does this all mean? Simple, we’d better get educated on how to engage in the age-old practice of bartering. continue reading…

Commodities and stocks have been on fire the past two weeks and I think it just may be time for things to take a breather. While I continue to stay long, taking some money off the table to lock in profits is a safe play.

If you look at the charts we can tell the odds are pointing to some type of pause or pullback in the coming days. I figure any day now we could see some profit taking.

Gold ETF Trading – GLD

The Gold ETF is one of my favorite trading vehicles. Using simple trend lines and looking at the recent price action you can see that the price of gold is looking ready for a pullback. Buying at this level is chasing and that generally means you buy at the high and panic out at the low. continue reading…