Commodities Trading 101

Commodities Trading 101

Commodities Trading 101Carley Garner is back releasing a 2nd edition of her book “A Trader’s First Book on Commodities.”

This edition has a new expanded introduction that deals with the recent changes in the industry regulators have enacted to protect brokerage clients with the recent failures of MF Global and PFGBEST along with what you can do to protect yourself.

There is also explanations on a speculators role in volatility and how it leads to the fortunes made and lost.

With the current high-inflationary environment in precious metals, oil, and food, with the anticipation of the effects quantitative easing will have who would not be interested in giving the commodity markets a look? You do not have to buy gold bullion off television commercials, you can trade gold futures and options on futures and benefit from trends and never have to take physical delivery of it. You can make money on oil going up, as all of your friends are bemoaning about the price of gas when they are filling up their SUV’s.

Carley Garner has written a high quality beginners book for commodities trading and she does a very good job explaining the basics you’ll need to know in order to get started trading in these markets. You will learn the history of commodity futures and how they came to exist and why. The book explains that all commodity brokerage accounts are also margin accounts while showing both the advantages to leverage and the risks involved in using margin.

She includes fascinating chart examples from history showing what would have been won or lost during potential irregular trading periods, which is what traders refer to as volatility within the markets.

The book devotes a chapter to explaining what type of broker you will need depending on your type of trading and your personal experience level. You will understand all basic order types from one chapter: limit, market, stop loss, buy stop, good til canceled, etc. I found the chapter on how to read commodity quotes, the explanation of contract sizes , and the amount of price movement per tick for each commodity educational and useful. (I am a stock and stock option trader so this book was educational for me).

The information contained in the chapter on emotional stability is what I have found to be the most relevant in my own stock trading over the past twelve years. I have seen that the ability to contain the emotions of fear, greed, and frustration will determine your personal success in the markets more than anything else. I like that the author explained the dynamic of frustration as it is not usually covered by most other authors, but is crucial to overcome so you can maintain the perseverance to win in the long term.

Risk management also plays a huge part in winning in the long term. It is very important to take into consideration that the upside profits available in commodity trading has an equal downside risk, unless you put in stops and honor them.

The author does a good job familiarizing the readers with the slang, terms, and psychology used within commodity trading. This is a great book for new traders that want to begin trading commodities. I highly recommend this book as the first book that traders read if they are interested in trading in the commodity market. I believe after reading this book you’ll have enough information to decide if commodity trading is something you want to pursue.