There was an interesting article yesterday in the Wall Street Journal. The article spoke about Bluetrend a trend follower & commodity trading advisor who last year earned 43.4%. The article discussing the struggles that Blue trend is currently going through this year ( down 5.5%). The truth is, in commodity futures trading returns like last year are above the norm.

The other part is returns like this attract a lot of hot inexperienced money. This is exemplified by the drop of assets under management from $8.6 Billion to $7 Billion. In order to compound your way to wealth investors need to commit themselves to their commodity trading advisor for a minimum of 3-5 years. Other than that they make themselves open to disappointment. More so. I got the impression that there was doubt that Bluetrend can come out of this slump.

The fact is in commodity futures trading, the only time there is money to be made is when there are trends. If there are no trends the majority of commodity trading advisors will not make money. That is why I stress the idea of patience. No one knows when a trade starts or stops. The whole idea of trend following is make yourself available for the upcoming trends. Quiet times lead to trendy periods.

In addition the article only focused on the largest commodity trading advisors who have billions of dollars under management. The issue that most do not understand, is that it becomes much harder to continue to generate high returns with large amounts of money under management.

The more money they have, the more potential slippage, as well as they are limited in the markets they are trading.When one invests with a commodity trading advisor they need to understand their methodology… risk management and money management. There are too many that are guided by returns and not proper due diligence. In conjunction to the quantitative approach a strong investigation into the qualitative issues are important.

Commodity futures trading can be a wonderful way to compound ones way to wealth but only with proper discipline, risk management 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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