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Do You Understand Commodity Trading & Trend Following?

InvestorEducation / Learn to Trade Jul 07, 2009 - 01:32 AM GMT

By: Andrew_Abraham

InvestorEducation

So you want to be involved in Commodity trading and trend following. You realize the benefits of liquidity and transparency in commodity trading & trend following. You realize that potentially you can protect your net worth from the potential of inflation. I really should not even say potential, with all the money that was printed by governments all over the world to me it would be a 6th sigma event if it does not happen.


But, Do you really understand what commodity trading is and entails.. The same goes for trend following. Do you have a plan? Do you plan to trade for yourself or allocate to a commodity trading advisor. Firstly, I have been an AP for an introducing commodity broker for too many years to count. The fact is our brokerage business is modeled on that investors do not have the discipline to run their own systems. The brokerage is based on running mechanical systems for clients. This enforces one of the main tenants of successful trading, Discipline.
Stating the fact that most investors do not have discipline how can they stick with a commodity trading advisor over the long run. This is what I really mean when I ask the question, do you really understand commodity trading? The key of long term success is to understand there will be draw downs and they are a part of trading.

On another tangent when I am at parties or events and I am asked what I do. I used to respond that I am in managed futures. Most people did not understand that. So they I started explaining I am in commodity trading. Well they got that…but very wrongly. First of all I am ( as my wife calls me) the most obessive compulsive paranoid person walking the face of the earth. Thinking this way has saved me and kept me out of trouble. Most people who I would speak to thought that commodity trading is reckless and gambling.

I would respond to the contrary, every trade is planned out with a stop if it does not work, I realize I do not know the future nor try to predict and most importantly I manage the risk. I ask them about their mutual funds or stocks. I knew the answer before I even started.. I asked them if they had a plan (HUH??) I asked them where do they exit if the investment doesn’t work (NEVER..Stocks only go up). I ask them do they think it is possible for the stock market not to always go up (this was before last years stock market crash). People have no clue. There were numerous periods the stock market did nothing.. I mean even buy and hold lost money…

Now I start telling people I am a trend follower at events. They think I follow fads.. the latest clothing or music..Then I explain what trend following really is..
1. Looking to invest over a long period of time and compound my way to wealth.
2. That trend following works in stocks..forex..commodity trading or even fashion (haha).
3. Trend following involves realizing one does not know the future
4. Trend Following involves using systematic mechanical systems and is one of the best ways of limiting risk.

If you want to learn more about commodity trading and trend following this is the place. I do it every day. I have seen every way to lose money…and this is the way to compound wealth when investors have the correct discipline and patience.

Andrew Abraham
www.myinvestorsplace.com

Andrew Abraham has been in the financial arena since 1990. He is a commodity trading ddvisor and co manager of a Commodity Pool. Since 1993 Andrew has been a proponent of quantitative mechanical trading programs. Andrew's major concern is not only total return on investment but rather the amount of risk that one would have to tolerate in order to achieve returns He focuses on developing quant models that encompass strict risk adherence and correlation. He has been a speaker at conferences as well as an author of numerous articles. Andrew has spent years researching ideas that have the potential to outperform indices as well as maintain fewer draw downs.

Visit Angus Jackson Partners (http://www.angusjacksonpartners.com) Contact: A.Abraham@AngusJackson.com (mailto:A.Abraham@AngusJackson.com)

© 2009 Copyright Andrew Abraham - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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