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INTRODUCTION

A. Objectives of this Commodity Futures Trading Course

This trading course describes a process that will help you to analyze futures markets and to
develop useful trading skills. It presents you with common industry information,
techniques and rules about commodity futures trading.

This is not a trading system. It is an educational presentation which uses common industry
information and techniques to help you define a logical, simple and complete Trading
Plan that will help you to intelligently pick markets that have the highest likelihood of
success. This course will teach you trading techniques that minimize your chances of loss
while simultaneously enhance your ability to profit from "expected" market price
movement.

You also need to define a Money Management Plan to control your risk and loss. And
finally, you also must paper trade (practice trading) for at least three months to develop
the confidence and skills to be successful in your trading efforts. By doing these things,
you gain a significant advantage in your futures trading efforts.

I can't guarantee your success B but I will do my absolute best to teach you how to trade
intelligently.

At the end of this trading course, you will know how to successfully do the following:

C Identify futures contract specifications and what they mean


C Recognize price chart patterns that suggest opportunity
C Use Selection Tools to identify a commodity that will likely make a big price move
C Use Confirming Tools to give additional "weight" to your market analysis
C Use Timing Tools to determine when to get into and out of a trade
C Devise a Trading Plan and a Money Management Plan
C Paper trade to safely gain valuable experience and prepare you for actual trading.

There is only one way to make money in commodities: Buy Low and Sell High! And
amazingly enough, you can do it in either order. That is, you can:

C Sell a commodity futures contract first, and then buy it back at a later time; or,
C Buy a commodity futures contract first, and then sell it back at a later time.

You'll learn more about how to do this in later chapters.

http://www.Learn-Futures.com 1-1 8 1999-2003 Thomas Wnorowski


B. Why trade commodities?

As a speculator (that's you), there are several good reasons to trade commodity futures.

C Commodity futures trading is a business that deals in the buying and selling of basic,
expendable items. Each in itself is a survival industry. They were here 20 years ago
and they will be here 20 years from now.

C The strongest reason for trading commodities is high financial leverage. It offers high
profit potential for a low investment. A $1,620 security deposit or margin will control
a Silver futures contract that contains 5,000 ounces of silver. So when the price of
Silver is at $5/oz. the contract is valued at $25,000. The margin in this example is only
6.5 percent of the commodity's value. A change in the price of Silver by 14 results in a
$50 change in the value of your futures contract B either for or against you. A price
move of 104 in your favor makes you $500 in profit.

C Your business involves just you and the market. Because it has no resource-draining
demands of other business activities, you don't have to manufacture or acquire a
product; allocate financial resources to advertise, market and sell the product;
implement and maintain telephone response capability to provide product information,
accept orders, and customer complaints; pay for resources to provide order fulfillment.
I think you get the idea. This is an ideal business to be in.

C It moves you from a Linear Income Model to a Geometric Income Model.

C Once you learn this process, it takes less than 30 minutes per week day of your time to
work at your business. With more free time, you have the opportunity to change your
lifestyle.

C. Commodity vs. stocks

C You need to put up the full amount of the stock value. You control commodity futures
contracts with a margin deposit that is usually between 5 – 10 percent of the value of
the commodity.

C Stocks price provides no analysis information for selection except earnings (which is
frequently manipulated by the company). Stock options allow a company to under-
report wages, and therefore under-report expense, which misleadingly inflates earnings.
There are over 15 tools available with commodity futures to help you select potentially
profitable commodities and time your entry and exit in the market. It's like having x-ray
vision into the market.

http://www.Learn-Futures.com 1-2 8 1999-2003 Thomas Wnorowski


C There are over 30,000 stocks to evaluate. There are less than 50 commodities.

C Stock prices move slowly, commodities have fast price movement.

C Stock is fictitious. There is no real basis for stock value other than earnings. Stock can
be "delisted" overnight and become worthless. Commodities have intrinsic value and
will always have value. People will always want grain and gold.

D. Notices

The Commodity Futures Trading Commission and The National Futures Association
requires the following notice be stated:

* * * There is a Risk Of Loss in Futures Trading. * * *

I am not an investment counselor or a commodity trading advisor, nor do I give advice on


specific investments. This educational trading course is designed to give you the skills and
insight that will help you to more successfully trade commodity futures.

Successful past results do not necessarily mean success in the future. There is a risk of
loss in futures trading. Do not trade with money you can't afford to lose.

Over 90 percent of new people who trade commodities lose money. The other 10 percent
are successful for the following reasons:

C They learned about how the futures markets work,

C They learned how to anticipate changes in the direction of a commodity futures


market's price and position themselves to benefit from that price change,

C They have defined and use both a Trading Plan and Money Management Plan.

This trading course will teach you how to do these things.

It is on strong recommendation that you completely read this trading course three separate
times. The first reading should be done to get the general idea of what is involved in the
entire process - that is, you get a general grasp of things. The second time, read it to help
reinforce your knowledge as well as help you to better understand the process presented in
this course. The third reading will be helpful, as you should be ready to start defining your
personal Trading Plan and Money Management Plan.

http://www.Learn-Futures.com 1-3 8 1999-2003 Thomas Wnorowski


Resources you will find both helpful and necessary in your trading activities are described
in Appendix B.

The next chapter describes Basic Futures Terms and Information.

http://www.Learn-Futures.com 1-4 8 1999-2003 Thomas Wnorowski