Commodities - more than metals/oil

[wayneL]

BTW I read that futures are only allowed to rise or fall a certain percentage per day.
Now suppose I have a stop loss order to sell my position that turns into a market order when hit with IB for a future.
The market opens for that day and almost straight away the maximum fall is hit again and the market closes for that day. In the meantime price went past my stop price.
Do I sell or do I have no control over that sale and the max might be hit in the next 5 days and I`m broke?

Yes.

It's called a locked limit move and unless someone is willing to trade at the limit price, you're stuck in the trade. However in reality, this is no different to an opening gap on a stock. (Which can be, and often is, much larger than lock limit moves on futures. I avoided futures for years because of this fear, but having seen some of the opening gaps on stocks, it's not a rational one.

Where the difference lies is in the use of leverage. Where someone is silly enough to gear themselves so highly where this scenario risks their ruin... well, they're bonkers.

I ALWAYS take this into account when placing a trade; ie what is the underlying face value of what I'm trading compared to account size (as well as the current and possible volatility)

If there is a price shock against my position, how will that affect my account? This is something I consider imperative to consider when trading anything, whether it stocks, futures or options. The leverage is available, but it does not mean I have to use it.

Sensible position sizing rules... always!!!!

 

[reece55]

Yes.

Where the difference lies is in the use of leverage. Where someone is silly enough to gear themselves so highly where this scenario risks their ruin... well, they're bonkers.

I ALWAYS take this into account when placing a trade; ie what is the underlying face value of what I'm trading compared to account size (as well as the current and possible volatility)

If there is a price shock against my position, how will that affect my account? This is something I consider imperative to consider when trading anything, whether it stocks, futures or options. The leverage is available, but it does not mean I have to use it.

Sensible position sizing rules... always!!!!

Couldn't agree more with you here Wayne.

Personally, I don't trade commods, but in any leverage position, you have to be aware of the potential for a price shock - review what the greatest move was in the chosen market you are in and see how that would affect your capital. This obviously is crucial for any overnight positions. Personally, any position held overnight for me in a leveraged position has a guaranteed stop - you may pay a bit more on the spread or commish, but I believe it is money well spent.... Plus, then I know from the outset what my maximum value at risk is at any given time.....

Cheers

 

[CanOz]

Sugar turned rather comically into a joke really didn't?

 

[>Apocalypto<]

Sugar turned rather comically into a joke really didn't?

Welcome to futures trading Can! You have to keep you wits about you, things can change damn quick on the short term!

Now how is your system going?

Can, I am not trying to be smart, but I noticed sugar was making lower highs on that chart before your entry. Did you check the monthly and weekly direction to know type of market you were in? Had it formed a band or V before your entry + broken any major resistance lines?

 

[CanOz]

Well it was clearly a counter trend position, but low risk, so worth a try. Very small loss.

Cheers,

 

[wayneL]

Sugar turned rather comically into a joke really didn't?

Welcome to futures trading Can! You have to keep you wits about you, things can change damn quick on the short term!

Well it was clearly a counter trend position, but low risk, so worth a try. Very small loss.

Cheers,

Yup! But it could have been the the bend that ended the trend. Worth a shot.

Que sera sera

 

[>Apocalypto<]

Well it was clearly a counter trend position, but low risk, so worth a try. Very small loss.

Cheers,

well good on u for taking it

 

[nizar]

Hi guys.

What broker do you use to trade commodities?
Any thoughts/opinions?

Does longterm trends work for commodities?
What time frame do you guys trade?

Thanks.

 

[wayneL]

I use www.interactivebrokers.com for most contracts as most commods can be traded electronically. I use www.orionfutures.com for pit contracts and most options.

I notice TI uses www.xpresstrade.com who have a pretty fair reputation.

The advantage with IB is that you can keep your funds in AUD which lessens the currency risk.

Trends? YUP!

No problems trading either direction either. Shorting is no problem.

 

[lesm]

nizar,

Have a look at Interactive Brokers (http://www.interactivebrokers.com/en/main.php).

 

[lesm]

Sugar turned rather comically into a joke really didn't?

Can,

Could have turned into molasses and that may have been a sticky situation.

Wayne,

Looks like we crossed over the top of each other.

 

[nizar]

Wayne/Lesm/Others,

Can you guys please give me a quick run down or how commodities work?

How about in terms of minimum requirements to trade?

(I understand for forex 1 lot = $100,000)

For commodity futures, what does 1 contract mean in $$terms?

Anything else i should know or anywhere i can go to get more info?

LOL im a grass roots level beginner so yeh....

Many thanks.

 

[wayneL]

Wayne/Lesm/Others,

Can you guys please give me a quick run down or how commodities work?

How about in terms of minimum requirements to trade?

(I understand for forex 1 lot = $100,000)

For commodity futures, what does 1 contract mean in $$terms?

Anything else i should know or anywhere i can go to get more info?

LOL im a grass roots level beginner so yeh....

Many thanks.

Radge has a commodities course which is well worth doing. It covers the nitty gritty on the different contracts.

I'm glad you're thinking of contracts in face value terms rather than what most do which is in terms of margin.

Each contract will be different and there is a bit of work involved in familiarizing yourself with each contracts underlying size, expiry dates, tick size, trading hours (yep they have different trading hours). I'll post up a few samples.

Mnay brokerages will let you open an account with $5k, but this is seriously a bad move... unless you,re very good at daytrading. Opinions vary on how much you need to start with, but the more the better.

 

[wayneL]

Here is Chicago Board of Trade's Corn contract specs (Their other contracts are there on the left, bet there are other exchanges as well)

http://www.cbot.com/cbot/pub/cont_detail/1,3206,1213+14389,00.html

To get the contract size in $ simple multiply the contact size by the price.

Wheat for eg is 5000 bushels. The current price is around $6.00 a bushel so $6.00 x 5000 = $30,000 US.

The main exchanges are: (Look for products/contract specs)

Chicago Board of Trade (CBOT) www.cbot.com

Chicago Mercantile Exchange (CME) www.cme.com

New York Metals Exchange (NYMEX/COMEX) www.nymex.com

New York Board of Trade (NYBOT) www.nybot.com

Steep learning curve in front of you. Good luck

 

[Seaking]

Hi
I have made the first steps toward getting serious about trading futures on a few indexes at this stage, and moving towards commodities down the track. I have been looking into streaming data providers and esignal seems to be the more popular one to feed into Amibroker. Does anyone have a few more suggestions I can check out...

 

[nizar]

Here is Chicago Board of Trade's Corn contract specs (Their other contracts are there on the left, bet there are other exchanges as well)

http://www.cbot.com/cbot/pub/cont_detail/1,3206,1213+14389,00.html

To get the contract size in $ simple multiply the contact size by the price.

Wheat for eg is 5000 bushels. The current price is around $6.00 a bushel so $6.00 x 5000 = $30,000 US.

The main exchanges are: (Look for products/contract specs)

Chicago Board of Trade (CBOT) www.cbot.com

Chicago Mercantile Exchange (CME) www.cme.com

New York Metals Exchange (NYMEX/COMEX) www.nymex.com

New York Board of Trade (NYBOT) www.nybot.com

Steep learning curve in front of you. Good luck

Thanks Wayne.
I'll be looking into it.

$30k
So I take it this statement is a lie

Richard Dennis
Began with $400 and turned it into a fortune estimated to approach $200 million. Perhaps the best-known futures speculator of our time.

LOL but i guess back in the 70s, $400 is maybe $10k now.... Hmmm....

Wayne how about mini's ?

And what do you think are the main advantages of commodities/futures over stocks?

THanks.

 

[wayneL]

Hi
I have made the first steps toward getting serious about trading futures on a few indexes at this stage, and moving towards commodities down the track. I have been looking into streaming data providers and esignal seems to be the more popular one to feed into Amibroker. Does anyone have a few more suggestions I can check out...

There is no better than esignal, but once you go past trading eminis, all the subscriptions will cost you a fortune. A small impost if you are bigtime, but for the average trader it adds up to a lot.

You can feed IB data into amibroker and it's free if you are a client, and most brokers will give you live snapshot charts. I use the IB feed plus an EOD download which works out very economically.

 

[wayneL]

Thanks Wayne.
I'll be looking into it.

$30k
So I take it this statement is a lie

Richard Dennis
Began with $400 and turned it into a fortune estimated to approach $200 million. Perhaps the best-known futures speculator of our time.

LOL but i guess back in the 70s, $400 is maybe $10k now.... Hmmm....

Don't forget you trade futures on margin. The margin for wheat at the moment is $1553. So if @rsey, you could start with say $5,000 and build up a multimillion dollar empire. I don't think anyone would suggest that as anything more than a gamble in the intitial stages though.

Wayne how about mini's ?

Great on Indecies and Oil. But even then SP miniss are ~$75k and crude minis are ~$34k. Thats face value. Margin of course is 3 or 4k

And what do you think are the main advantages of commodities/futures over stocks?

THanks.

Here's one guys view http://www.moneyweek.com/file/27973/eight-reasons-commodities-beat-stocks-every-time.html

I would add that I like the non correlated returns. If you are all long in the stock market and Greedscam open his mouth without being asked, your whole portfolio takes a hit. But Corn or Lean Hogs don't give a stuff about Greedscam. You will have longs or shorts in completely uncorrelated markets, and I like that.

I still like stocks though. Stocks you can stick in the bottom drawer. In my view commodities themselves are not "investments". They must be managed unless you're Jim Rogers.

 

[nizar]

Here's one guys view http://www.moneyweek.com/file/27973/eight-reasons-commodities-beat-stocks-every-time.html

I would add that I like the non correlated returns. If you are all long in the stock market and Greedscam open his mouth without being asked, your whole portfolio takes a hit. But Corn or Lean Hogs don't give a stuff about Greedscam. You will have longs or shorts in completely uncorrelated markets, and I like that.

I still like stocks though. Stocks you can stick in the bottom drawer. In my view commodities themselves are not "investments". They must be managed unless you're Jim Rogers.

Thanks Wayne.

How does margin work?
Do you get paid/have to pay interest just like with CFD indices??

 

[wayneL]

Thanks Wayne.

How does margin work?
Do you get paid/have to pay interest just like with CFD indices??

It works similar to CFD Margin except

a) There is no interest to pay or be paid (though you are usually paid a pittance on your cash balance)

b) Rather than a set percentage, it is calculated using a complicated set of algorithms called SPAN (Standardized Portfolio ANalysis of risk) and is essentially an assessment of the one-day risk for a trader's account. (Margins are available on any brokers site or the exchange sites above)

A quick tutorial on futures margin =>> http://www.devnic.com/tutorials/how_margin_commodity_futures.html