Profiting in a Falling Commodity MarketCommodities / Commodities Trading Dec 16, 2009 - 04:01 AM GMT
Anything can happen in commodity trading. As much as inflation can come about there can be deflation and result in a declining market. Most people do not think it is possible to profit in a declining market. This could not be further than the truth. As long as there exist trends profits can be made on the upside or on the downside. However on the upside there is no limit how high it can go…so there is statistically more profits on the upside.
So many are afraid of bear markets but there are successful trend following commodity trading advisors that know how to make profits in commodity bear markets. Many commodity trading advisors like bear markets because there is less involvement of both the public and institutions. The common knowledge that the public is always wrong. More so, the public has a stigma about going short.
To me as a trend following commodity trader…it is as easy going short as going long. I really do not even think about it. I let price dictate my actions with my model monitoring the situation.
I have seen in my career that Bear markets go far below their true economic value. One example of this was last years Crude trade. It completely fell out of bed and has almost doubled from it’s bear market lows.
If you want to be a successful commodity trader. Make yourself available to which ever direction any market wants to go. This is the one of the keys to be a successful commodity trader.
Andrew Abraham has been in the financial arena since 1990. He is a commodity trading advisor 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.
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