Stocks and Commodity Futures Trading Winners And Losers,
The Difference Between
Those Who Make It & Those Who Bomb Out

• When a Stock or Commodity Futures Trading winner makes a mistake he/she says, "I was wrong."
• When a Stock or Commodity Futures Trading loser makes a mistake he/she says, "It wasn't my fault."
• A Stock or Commodity Futures Trading winner goes through a problem. A loser goes around and never gets past it.
• A Stock or Commodity Futures Trading winner says, "I'm good, and I can be better." A loser says, "I'm not as bad as a lot of people."
• A Stock or Commodity Futures Trading winner says, "I'll be glad to do it." A loser says, "That's not my job."
• A Stock or Commodity Futures Trading winner listens. A Stock or Commodity Futures Trading loser just waits for his/her time to talk.
• A Stock or Commodity Futures Trading winner takes responsibility for his/her actions. A loser blames others for his/her trading problems.

Futures Trading articles below

The Key Is Trading The System Correctly, Not Being Right Every Time

Commodity trading can be at best perverse. That is, the markets will do anything and everything they can to force you out through disillusionment, boredom, and of course, losses. It's only through discipline and cold hard adherence to system you're trading, do you even have a chance to succeed. There can be and probably will be periods of up to 3-mos. when any system can be no better than even or in the red.

Psychological studies have shown that such periods of negative or neutral performance will cause most people involved in speculative ventures such as commodity trading to become the aforementioned disillusioned, disgusted or bored. This causes them to quit although they have not lost what they originally intended to risk and usually right before a huge winning streak. All of this has happened to me, and it's only after this kind of "hands on" experience so we are able to relate it to you better.

In summary, hang in there. Don't feel that you have to win every day or win every time. Nobody does. The key is trading the system correctly, not being right every time. It is the end result that counts, and we intend to win.

5-Ways to Make Money with Spread Trading vs.
Only 2-Ways with Open Position Trading

Commodity futures spread trading is fast becoming a lost art among average traders. Most Account Executives (Commission Sales People) seem not able to comprehend or really want to be bothered with spreads, as open position trades normally generate commissions faster. With one eye on the Lexus in the parking lot and another on the alimony payment to ex-wife, the last thing the average salesman wants is a slow trading spread.

However, much can be said for spreads. Let's compare spreading advantages with open position trading.

In a naked long trade, the market has only one way to go to make money, and that is up. In a naked short position, to make money, the market must go down. Any other movement means a loss, even a "wash" trade, because commissions still have to be paid.

In an average spread, with one sidelong and the other side short, the market can produce a profit under the following conditions:

1. One side can move up and the other stay unchanged.
2. One side can move down and the other stay unchanged.
3. Both sides move up, but one side moves up more than the other.
4. Both sides move down, but one side moves down more than the other.
5. One side moves up and the other side moves down at the same time.

Most of the time, the margin requirements for spreads are much less than the margin requirements for outright long or short positions, and sometimes, because of the nature of the spread and the seasonal factors involved, certain spreads are marked-to-the-market, which means that margin is only required to makeup paper losses if they occur in the spread.

Spreads are a blessing when markets go locked-limit up or down in that you are able to exit if you wish. Naked longs cannot escape a lock-limit down market, as there are no bids. Naked shorts cannot exit a lock-limit up market since there are no offers. The relationship between the legs of the spread is the only factor considered by the floor when you're entering and exiting during lock-limit days, so the trade, though not necessarily the best fill in the world, can be done over wailing and gnashing of teeth of those caught in the trap!

When it is difficult to determine whether a particular market is changing trend, comparing the back month's price action with front month price action may be a good indicator of whether the market is a bull or bear market. Chances are if the back months are performing better than the front months, you are in a bear market. The reverse could indicate a bull market environment. Spreading action may be justified in such cases to the trader's benefit. It's amazing how few traders pay attention to this rather obvious and readily activity.

The basic knowledge of seasonal trends can give the spreader immense advantage at times. We know that Wheat is harvested in June and July. Corn is harvested in the Fall. Isn't it possible to determine with the help of charts to go long the last month of old crop Corn and Short the first month of new crop Wheat sometime in the spring to take advantage of this natural process? Of course, other factors may enter the picture, such as planting intentions, supply/demand, etc., but the simple knowledge of this spread possibility should be profitable each year.

Wouldn't it be a good idea to also look at the relationship between different months in the same crop to weigh carrying charge premiums? Much profit has been made in spreads that were at full carry by buying the front month and shorting the back month in cases where carry is unusually wide.

The relationship between different currencies, bonds and notes, gold and silver, heating oil and unleaded gas, hogs and cattle, and many other commodity futures contracts is a fascinating study! It's much more interesting and much more profitable in relation to risk at times compared to open position trading.

Once the trader gets involved in spreading and becomes familiar with order placement and fundamental seasonal factors, he should find that perhaps his open position trading improves. He is more aware of the fundamentals and charts have more meaning.

His thought process is now expanded past the simplicity of deciding whether to go long or short. His trade timing, because of his new knowledge of seasonal spread factors is more precise. His ability to determine trends is enhanced, and best of all; his bottom line performance in terms of net profits in all his trading activities should show marked improvement to your trading profits.

We have covered only a few considerations in the preceding paragraphs. There are many more, such as the consideration of the "personalities" of the various trading pits, delivery points for different commodities and their impact on prices, differences between contract sizes in inter-market spreading, and whether a market is cash settled or subject to delivery. All these factors influence spread trading.

Learn as much as you can about spreads. I consider them to be the secret to my longevity as a commodity futures trader! Wishing you considerably better trading!