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How Do I Know When The Trend Is Starting in Commodity Trading

InvestorEducation / Commodities Trading Jul 15, 2009 - 02:16 AM GMT

By: Andrew_Abraham

InvestorEducation

Best Financial Markets Analysis ArticleGuess what, You never know when the trend is starting in Commodity Trading. Sorry no Holy Grail. All you can ever do when commodity trading is try to put on low risk trades. I want to share with you two recent trades we have put on. I have no idea if they will work or not ( contrary to what everyone wants, Guarantees …


In all truthfullness the Yen trade I have no opinion or thoughts, However with the SP 500 this would be a trade that I would think should work ( I only trade via the signals not on my opinions). The background for the SP500 in my opinion ( which does not mean anything) is very negative. Unemployment is increasing as well as foreclosures are increasing. The VIX was at extreme lows. Everyone ( except me) is too optomistic and think the problems in the world’s economies are solved. Regardless… we are losing money in our SP 500 that we took last week ( slightly). Time will tell..but it does not matter as it is only one trade and we are risking such a small amount of our commodity trading capital.

The key is when you are commodity trading you need an exact plan. You need to know exactly what constitutes a buy signal. As far as commodity trading advisors that trade via trend following, the key is price action… You will see the JY took out highs not seen since Feb 09. So lets see what happens and put on a trade. We risk approx 1% of our account. We have no idea if the trade will work ( actually most trades do not work). Regardless, we took a small bet. We did not listen to CNBC or Bloomberg with the experts that told us the JY is moving and it has to go up for whatever reason. Price was our determining factor. That was it, but we have an exact plan that is simple and understandable.

The JY was one of the strongest markets out of 80 plus markets ( tactical allocation) and the SP 500 is one of the weakest. Time will tell. One needs to maintain a thought process like this. Regardless if they themselves are involved in commodity trading or if they allocate to a Commodity trading advisor. The investor needs to know that money is made over a series of trades. No trade means anything, even the rare large winners. The key is to keep on putting on low risk trades visa vee their mechanical system without opinion and manage the risk.



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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