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What is Riskier The Stock Markets or Commodity Trading?

InvestorEducation / Learn to Trade Jul 17, 2009 - 01:48 AM GMT

By: Andrew_Abraham

InvestorEducation

Best Financial Markets Analysis ArticleThe question always comes up what is riskier, the Stock Markets or commodity trading? Firstly both are, but what I have an issue with is that the initial response when one hears that I am a commodity trading advisor or involved in commodity trading is that is RISKY.


How many people forgot how they listened blindly to CNBC or Bloomberg during the tech bubble and lost their retirement money with Enron, Worldcom and countless other stocks. It seems people want to watch Jim Cramer, the weather forecast for crops, what Bernanke will say to think they will find their way to investment success. Even now the talk of green shoots. People want to predict. This is what makes risk. People that try to gather all the information and make their analysis without regard to position size… where to exit…etc.. ..are totally increasing their risk. Successful trend followers on the other hand focus soley on the risk. Trend followers can be involved in commodity trading, stock markets, currencies, bonds or individual shares.

By now if you have been reading my posts you realize that prediction is pointless. No one knows the future. Successful commodity trading advisors and trend followers know that only thing that is going to get them in a trade is some type of price move to the upside or downside.

Not what Bernanke might say…Or what Opec might do. Cold hard facts… PRICE MOVEMENT!. The goal of the successful commodity trading advisor or trend follower is simply to jump on board, make themselves available for a “potential” move. Again no predicting, and more so..successful trend followers know that most of the trades will not work.

The successful commodity trading advisor or trend follower does not care. He does not put any mental baggage on any trade. The trade either worked or did not. The successful commodity trading advisor or trend follower does not need to take BIG bets.. but a small percentage of his/her account (less than 1%) to see if any trades works or not.

The real key in successful wealth building,stock markets investing or even commodity trading is to compound money over long periods of time. In order for this successful wealth building, the secret is to understand the risk in any approach ( stock markets, bonds or even forex) and look to manage the risk on a consistent and diligent basis. What is this basis.. ( as I say in all my posts)

Risk per trade
Risk per sector
Open trade risk

Do not think that anything is without risk. All types of financial products ( even cash) have risks. Accept the risk, define the risks and separate yourself from the emotions. As I started out in this post, most people want to be told what to do, that is why they watch CNBC etc.. More so what I have seen the majority of the investing public does not have the discipline to follow even the best thought out financial plan with strong risk & money management. If you seek to compound money over long periods of time, consider allocating to a professional money manager, commodity trading advisor that trades in a manner you understand and you can follow. In addition you want to be sure you have liquidity ( you can take your money out at least within 1 month) and you have transparency.

Lastly do not invest more than 5% of your net worth in any idea. Remember everything has risks. Even the way the US dollar is going just holding US dollars in your bank account can increase your risk. Diversify and look to 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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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