How to become a commodities trader

[r3vbr]

To those of you who have experience on the field, what books do you recomend, how did you start?

I think it's a given that you should specialize in a few if not a single market like for instance soy bushels or something like that.
So therefore if someone is just starting out, wouldn't it be very important to measure how many people trade a given commodity and pick the one who has least professional traders active and specialize in it? (I don't have a clue about where to get this data)

Also volatility is a big plus for every trader, but is it mandatory for the goods to have an uptrade in prices or does the good commodities trader earn money in both bull and bear markets? In other words, do the prices have to follow an up or down trend for traders to make money or can you time the market on times where the prices are flat and vary only due to "noise"?

[AggroFish]

I used to be a licensed commodities broker, I cant remember anything except for how the CFTC hated me.

Check barnes and nobles for the series 3 books to maybe get the mechanics down, how to price, what trades where, etc and then get more detailed like a specific trading platform....who knows, wild markets.

[DcifrThs]

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pick the one who has least professional traders active and specialize in it? (I don't have a clue about where to get this data)

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i think it is far more important to understand the structure of the market. the # of pro traders doesn't tell you as much as the amount of hedging $ vs. speculative $.

you can look at the futures curve and look at its structure and get data on the total # of shorts that have been consistently and continually rolled. it'll be hard to tease anything useful out of this data so maybe a more common sense/asking pros or others approach is necessary.

your goal should be to pick the commodities where there are the most inefficiencies, not the least # of pro traders b/c the latter could indicate that the market is extremely efficient. what trading does necessitate is a solid grasp of supply and demand in that market.

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Also volatility is a big plus for every trader, but is it mandatory for the goods to have an uptrade in prices or does the good commodities trader earn money in both bull and bear markets? In other words, do the prices have to follow an up or down trend for traders to make money or can you time the market on times where the prices are flat and vary only due to "noise"?

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i would back up a step if i were you. it doesn't sound like you have a solid foundation in thinking about trading yet. for instance, the spot price can remain 100% flat for an entire year (virtually impossible) but you can still make a TON of money if the futures market is moving around significantly but not enough to pull the spot one way or another (or the futures market moves a ton and CAN'T pull the spot one way or another due to a lack of a lending market in the commodity thus preventing arbitrage from doing its job).

Barron

[gordongecko]

check amazon.com for some books, I myself went the technical analysis route so I first picked up a few books on that Then I bought some of the for dummies books and idiot guides. Those things are worth every penny. I learned more from one of those books than I did 10 other books. Also check out www.elitetrader.com for a forum, it isnt always the greatest, but it is the best around. Good luck.

[mrbaseball]

I trade commodities. I started out in the interest rate arena but rarely trade those anymore. Nowadays I trade mostly stock indicies and energies. I trade them strictly interday and from a technical perspective.

Every market will be chocked full of professionals. And from a fundamental perspective you will never know as much as Goldman, Merrill, Bear etc. or the gazillions of hedge funds. I find energies to be the best "technical" markets however they are also ultra volatile.

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is it mandatory for the goods to have an uptrade in prices or does the good commodities trader earn money in both bull and bear markets?

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The way I trade it doesn't really matter. I concentrate on support, resistance, pivots, momentum, trendlines etc. and then use other technical indicators (oscillators, moving averages etc) as confirmation. The most important thing is recognizing what kind of market you are in. I trade differently in a choppy market than from the way I would in a trending market. If you try to trade the chops in a trender you are screwed and if you try to trade the trends and breakouts in a chopper you are screwed. Then there are the big swing reversal days. Recognizing that the tide has turned is very important too. This is why I don't really look for mechanical systems. Each day and market is different and what worked like a charm yesterday may be a total nightmare today. Experience in seeing all of the different curveballs the markets can throw at you is important too and the only way to get it is to live it.

As far as books go I typically just read technical analysis books and trading psychology stuff. Getting you mind right, your plan down and adhering to it with strict discipline and the proper mental attitude is what is important.

[pig4bill]

If I were to trade futures again, I would use the T/A approach. I just went by the seat of my pants, which is essentially T/A without charts. I did surprisingly well considering I was trying to do it at work. This was pre-internet so I had to call every time I wanted a quote.

I would concentrate on just one contract, so you get a sense of how it trades. You can expand later on. Pick one that doesn't trade thin. Also pick one that's not prone to wild swings, like the metals. It's no fun getting trapped on the wrong side of lock limit moves day after day. I liked T-bonds, and stock indexes are probably good as well.

You should also look for the mini contracts like the Mid-America exchange has. Instead of $16 (or whatever) profit or loss on a tick, they might be $8 or $4. Considering how low commissions are, don't worry about making money starting out. Make winning trades first! Trade 1 contract at a time. Once you're confident you can make winning trades, it's no problem scaling up to full sized contracts and increasing the volume. That's one great thing about trading futures - it scales up seamlessly, unlike the stock market.

[fun160]

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You should also look for the mini contracts like the Mid-America exchange has.

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Make that "had." The Board of Trade closed the MidAm a few years ago. Most/all the mini contracts trade electronically these days.

[Seether]

Do most commodity traders tend to do it themselves or as part of a firm?

[Moonshine]

so how many people out there actually

1. Make money trading commodities on their own

2. Can attribute these gains to skill and not just luck of the draw?

[DcifrThs]

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so how many people out there actually

1. Make money trading commodities on their own

2. Can attribute these gains to skill and not just luck of the draw?

[/ QUOTE ]

those who have access to great buy side research (via friendships or working w/ top firms) are definitely more likely to succeed "on their own" in addition to those with significant industry (read supply and/or demand side) experience.

joe schmoe off the street buying "how to get rich in the commodities markets for dummies" is not too likely to make it imo.

Barron