I think you’ll be surprised with the business opportunity I have for you this week.
But, there are plenty of opportunities for entrepreneurs looking to make a little extra cash “on the side” too. Contrary to what your uncle or brother-in-law may have said, you won’t lose your shirt (or the kitchen sink) if you run this business like the professionals do.
But that’s true with most business, isn’t it?
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In every business or market you’ll find amateurs, savvy professionals, and a boatload of people in the middle!
It’s how you apply information that makes all the difference.
The business I’m talking about is commodity futures trading. I’ll cover some different aspects of this market and business in future issues. This week I’ll focus on agriculture commodity futures trading.
The moneymaking potential of this business is staggering!
Here’s what I mean…….
> John Henry turned $16,000 into more than $1.3 billion. He purchased the Boston Red Sox, Fenway Park, and the New England Sports Network with his “winnings”.
> Monroe Trout is a multimillionaire futures trader. He oversees a $2 billion commodity-trading fund in Bermuda (but he’s as easygoing as the guy next door).
> Ed Seykota turned $5,000 into $15,000,000 in less than 12 years by trading commodity and financial futures. Most people consider him to be “the” guru.
> Infamous “Ag Trader” Richard Dennis made his first million at age 25. He amassed a personal fortune of more than $200 million trading futures.
> Michael Marcus has been profiled in the book “Market Wizards,” because he’s amassed several fortunes trading futures.
There’s a risk of substantial losses in this business too…don’t kid yourself.
That’s why I have to mention the following stuff….. You have to agree to read and understand the following disclaimer before continuing this week’s article:
THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.
THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS.
Okay….now that I’ve managed to scare the daylights out of you, let’s get into the facts about this business. You can trade commodity futures from your kitchen table, home office, laptop, or mobile phone from anywhere in the world.
In fact, millionaire sheiks trade commodity futures from their luxury tents in the desert via iPhones and satellite-enabled laptops!
I’ve placed trades poolside at Walt Disney World, watching my kids slide down Dumbo’s trunk! Contrary to what the masses believe, it doesn’t take a lot of money to open an account and get your business started.
Most commodity brokerages require an initial deposit of $5,000 but there are a few that only require $2,500. But hold on to your money…..you can paper trade in this business before risking a dime!
You can also limit your downside risk by trading commodity based exchange traded funds (ETFs). You can Google the term. But I’ll give you an “insider’s perspective” into commodity based ETFs in an upcoming issue.
As I said…..today I’ll focus on trading agriculture futures.
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My first “Ag Futures” lesson came in March 1990. I know….that was a LONG time ago. But that’s when I placed my first trade, and I knew less than you’ll know when I started.
Anyway, I lost more than $2,000 in the soybean market with my first trade. (It seemed like a lot of money at the time.) Ironically, it was this trading loss that hooked me on the commodity futures market.
Here’s what I mean…..
It dawned on me if I could lose $2,000 in three weeks … then I could certainly make that much, or more! A seasoned professional taught me to approach trading as a business, not as a hobby. My mentor also taught me to focus on ONE market and gain an understanding of it worked.
In other words, amateur traders typically jump from one market to the next without fully understanding HOW each market worked and moved. They do this with stocks too! The most successful “Ag traders” I’ve known focus on one market.
Granted, after trading for several years professional traders may have an understanding of several markets. But they focused on one at a time. This is what enables some traders to seize opportunities and make a fortune.
Anyway, shortly after my initial Ag trade and loss, I made $3,200 in the same market. But this time, I did it in less than 3 days!
On top of that, I learned the importance of removing profit from the market and starting over again small. I’ve been trading like this every since.
Professional traders approach the market much differently than amateurs do
Professional traders, at the least the most successful ones, approach the market differently than most people. They understand markets are predictable to a degree. If you can predict where a market is going with even a little consistency, you can make money…..and if you know how to leverage properly (and contain risk) you can make a fortune! People, and therefore the markets, are predictable to a degree.
When I began to really understand this truth my life and money making ability changed.
Every market tends to move in cycles, trends, or “waves.” If you study historical price charts of any commodity you’ll begin to see fairly consistent cycles, trends or “waves”.
If you can apply this information to your trading you’ll increase the probability of being successful.
Okay…let’s get to it…….
I’m going to show you an “insider” approach to commodity trading I learned from a very successful commodity trader. I’ve made a ton of money with this approach. I’ve endured some losses too, but that’s one of the best features of the system.
You’ll learn to limit your trading positions and take losses as a cost of doing business without getting emotionally charged. Once this approach to commodity trading sank into the innermost part of my mind it changed my life, at least the moneymaking part of it.
The tendency of most people when they hear about a system like this is to either laugh it off or disbelieve that it could ever be this simple. But it is SIMPLE….and that’s what makes it so powerful.
This approach to trading has probably produced more millionaires than any system ever devised. Granted, there are thousands of so-called “trading systems” on the market today…and some are better than others.
But this approach has nothing to do with software. Although a smart programmer could put the “essence” of it into a software program. But software programs always have a flaw….it’s called human logic.
But frankly, I think you’d learn more about trading by going to the Chicago Board of Trade and watching the floor traders for one afternoon. My dad taught me one of the best ways to learning something is to stop talking and simply observe.
But before we get to the approach I wanted to give you a quick overview of commodity futures trading, so you understand the basics.
Quite simply, a commodity future contract is an agreement (obligation) to buy or sell a given quantity of a particular asset at a specified future date at a prearranged price. Futures contracts have standard delivery dates, trading units, terms, and conditions.
Futures can be based on any number of underlying assets. There are futures contracts available in individual shares and stock market indices, bonds, interest rates, coffee, sugar, orange juice, and agricultural commodities.
You can “open” a futures position by either buying or selling a contract.
You can “close” your futures position by doing the opposite – either selling or buying the same contract. In practice, most futures contract positions are “closed out” before they expire.
If you hold a view that the underlying asset will rise, you could buy a LONG futures position, which commits you to take delivery of the underlying shares, or equivalent cash value, at a prearranged price and by a certain date.
If your view is that the share prices for the underlying asset will fall, you could sell a SHORT futures position, which commits you to deliver the underlying shares, or equivalent cash value, at a prearranged price and by a certain date.
Futures contracts are typically traded on government-regulated exchanges like the Chicago Board of Trade (the largest futures exchange). There are also commodity futures exchanges in most industrialized countries.
A Little-Known Approach to Commodity Trading
The most powerful aspect of commodity futures trading is leverage. That leverage can work for or against you. What’s more, the most successful traders have learned to let the market determine how much leverage to use and how much money you should make.
Most of the time, people become emotionally charged and then arrogant when they have a large winning trade. It’s very common. The amateurs will always trade like they’re in Vegas. The important thing to remember is that the market can determine when to enter or exit a trade.
The “Insider” approach to commodity trading is easy to follow and understand.
Basically, you’ll leverage your positions through four series, remove your profits, and start over again small.
Let’s take a hypothetical trade in the corn futures market. Each “futures contract” of corn on the Chicago Board of Trade consists of 5,000 bushels. The deposit or margin to control this contract is about $500.
Every time corn moves one cent, the value of the futures contract increases or decreases by $50. If the price of corn on the futures exchange closes up five cents, that means the value of this corn futures contract would increase $250.
If you bought a corn futures contract when the market opened and sold it after the contract had gained five cents, you would have made $250 net profit. The corn market typically trades within a 15-cent range.
Let’s say that you purchased one corn futures contract and it closes up 10 cents. But you hold on and don’t sell. Over the next couple of days, corn futures close up 20 cents and you decide to sell. You would have made $1,000.
But rather than take your money out and celebrate, you think the market may go higher. You base this opinion on the fact there’s been too much rain, too much sun … or whatever.
(There are basically only two ways to approach the market – either from a technical or a fundamental point of view. A technical view is based on charts, cycles, Elliott Waves, etc. A fundamental view is based on supply, demand, weather, crisis, etc. If you can use BOTH of these approaches, it’s even better!)
This time, you’re going to buy two corn futures contracts. The market begins to drop … but you don’t panic, because the market goes up and down all the time.
You’re confident that corn prices will continue to rise, and they do.The market closes up 15 cents at the end of the week, and you sell the two corn futures contracts.
Important note: Unlike real estate, coins, brick-and-mortar businesses, and hundreds of other things, the futures market is IMMEDIATE. This is especially true for the markets that have large volume and open interest. The corn futures market on the Chicago Board of Trade is HUGE. When you place an order to buy or sell, it’s filled almost INSTANTLY.
Now, you’ve made $1,500, because the market closed up 15 cents – but this time, you have two contracts (10,000 bushels x 15 cents = $1,500).
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The following week, you buy three corn futures contracts at the market. This time, there are all kinds of rumors floating around about a pending drought, which of course affects corn in a big way. The prices jump 25 cents in two days. By the end of the week, corn futures prices are up 40 cents and you sell all three contracts at the market.
How much have you made? Well, 15,000 bushels x 40 cents = $6,000.
You’ve barely slept the entire weekend, because you just can’t believe it. But on Monday, you have ice water splashed in your face … because the corn price drops 30 cents!
On Tuesday, the price begins to climb again. This time, you buy four corn futures contracts at the market. The prices continue to inch upward and then stay flat all week. The following Monday, the prices start up briskly again – and by Wednesday, the price of corn is up 10 cents. You decide to sell all four contracts at the market.
The price was up 40 cents, dropped 10, and then closed on Wednesday up 10. The total gain was 20 cents. So your profit is calculated as follows: 20,000 bushels (4 contracts) x 20 cents = $4,000.
Bottom line profit for all four series of trades is: $1,000 + $1,500 + $6,000 + $4,000 = $12,500.
This is the kind of money that’s typically made every few seconds on the exchange by dozens of traders who use this system.
The three most important things to remember about this system are:
· Only pyramid positions through four series of trades.
· Remove all of your profit from the market. (Wire it to another account or have your broker send you a check.)
· Start over again SMALL.
That’s how the most successful professional commodity traders do it!
You see, amateurs NEVER remove profits and start over again small. They keep pyramiding positions over and over again. They usually end up giving back ALL of the profit and oftentimes their original stake as well! On top of that, amateurs ALWAYS overtrade without an approach or system. They become “entangled” in the daily action of the market and lose their perspective.
Obviously, I used a hypothetical example to illustrate how this little-known approach to commodity trading works in the real world. I wish the markets were this simple! And I’d like to add one more element to the scenario. Panic! That’s right, PANIC.
Panic and hysteria can be a commodity trader’s best friend.
In 1993, the Midwest United States suffered one of the worst floods in history. I saw the devastation, because, at the time, I was moving my family from Colorado to Maine. The AG futures market went berserk. Soybean prices were “limit up” for days on end. When markets go “limit up” or “limit down,” that means no one can get in and no one can get out.
But you can trade these markets successfully. You’ll begin to understand how fortunes are made. If a cataclysmic event like an earthquake, drought, flood, or massive frost happens in a place like Brazil’s coffee country, you’ll know where prices are most likely to go. Up!
Sometimes, there’s a cataclysmic event that causes prices to plummet – maybe a massive increase in the jobs report, record mortgage foreclosures, or the explosion of a nuclear bomb somewhere.
In cases like that, the dollar, stock market, and bond market would probably drop. Gold and the Swiss currency would probably skyrocket. As a trader, you could take advantage of the situation.
I didn’t say take advantage of people. I said take advantage of the situation.
The soybean market that I mentioned earlier went up as much as $4.50 a bushel during the flood panic of 1993! That means one soybean futures contract would have increased $2,250. If you had controlled 20,000 bushels without pyramiding your positions, you would have made $9,000 in less than two weeks.
Soybean traders typically control several hundred contracts at a time.
If you had controlled 50 soybean futures contracts during the entire six-week flood scare in 1993, and you had sold them before the top, you would have made $112,500.
Can you see why people are attracted to the commodity futures markets?
Another important aspect of commodity futures trading is “stop-loss” orders. You can place stop-loss orders above or below your entry points to insure that you’ll “lock in profits” when the market rises or “limit your losses” when the market falls.
Spend some time learning about the commodity futures markets. You’ll be amazed by how easy it is for the “small guy” to make a living at it … or even a fortune!
This business may be a perfect fit for you. It’s important to never open an account or trade with money you cannot afford to lose…that would be foolish.
If you have limited resources then I highly recommend trading commodity options (which I’ll cover in future issues) or commodity exchange traded funds (ETFs). Your downside risk can be limited in a big way….but the upside profit and leveraging potential will be limited as well.
Learn what you can about this fascinating business, and then call one of the brokerages listed below and ask for more information.
Your Humble Host,
(Ed Note: Marc Charles is referred to as “The King of Business Opportunities” ….and for good reason. He should be known as “The King of Legitimate Business Opportunities”…because he’s launched, bought, sold reviewed and advised on hundreds of businesses and money making opportunities. He understands legitimate opportunities. Marc has agreed supply League of Power members with crucial updates regarding legitimate business and money making opportunities.)
******** Action Strategy ********
You’ll need to review today’s issue several times before you “get it”. Put it aside for today. But tomorrow when you re-read today’s issue take some notes on a clean sheet of paper. Whatever comes to mind write it down.
Receive a $20,000 practice account absolutely FREE – here. You can “paper trade” commodities risk free for as long as you like. When you know what you’re doing open a real account….or trade smaller e-mini contracts!
******* Valuable Resources *********
World Commodity Futures Exchanges
Singapore Mercantile Exchange
“All About Futures,” by Russell Wasendorf Sr.
“Market Wizards: Interviews With Top Traders,” by Jack Schwager
“The New Market Wizards,” by Jack Schwager
“Trade Your Way to Financial Freedom,” by Van K. Tharp
“Reminiscences of a Stock Operator,” by Edwin Lefevre
“Agriculture Options,” by George Angell
“Commodity Trading Manuel,” by the Chicago Board of Trade
“Winning in the Futures Markets,” by George Angell
“Elliott Wave Principle,” by Robert Prechter Jr
Farr Financial (FarrDirect)
e-Mini Commodity Contract Brokers (firms specializing in smaller accounts and e-mini trading