Want to be successful in the world of commodities trading? The professionals consistently show that it can be done; however, most beginners venture in, lose a significant amount of their capital, and leave commodity trading without understanding that there are principles involved in good trading. Spurred on by academia, they believe that the markets are equally random and efficient. With this flawed approach, it would be impossible to learn how to invest with a thoughtful plan or intellect to improve your performance against the masses.
This concept has been dismissed by successful traders; these people make their fortunes by living the principles of commodities trading, not by theorizing from a college campus. George Soros, arguably one of the greatest traders of all time stated, “The random walk theory is manifestly false -- I have disproved it by consistently outperforming the averages over a period of twelve years”. Mathematics concurs with the comment from Soros; it has been shown that the markets are non-linear, dynamic systems. Mathematicians are able to analyze such chaotic systems. Their appearance of chaos merely hides the fact that they are not completely random. Price movement in the commodity market has an element of chaos, but also includes a small trend component.
The misconception for the beginner investing in commodities trading is: in order to make money, it is necessary to know the movements of the market. The random walk, or chaos, theory suggests that the commodities (as well as other) markets are not predictable, except in the most generic sense. So states “Trader Vic”, in his book, Methods of a Wall Street Master. Famous trader Vic Sperandeo warns: "Many people make the mistake of thinking that market behavior is truly predictable. Nonsense. Trading in the markets is an odds game, and the object is always keep the odds in your favor." His message is clear; good commodities trading involves following chart formations and trends in such a way that you can be profitable.
There are several obstacles in the paths of commodities traders. Finding a long term investing method that actually has demonstrated a statistical edge over the rest is the first task. Second is consistent adherence to your method. Finally, staying with your method long enough for this “edge” to manifest itself on the bottom line. A method such as candlestick chart analysis can assist both the experienced and inexperienced commodities trader with all three hurdles. Understand this; the principles of candlestick analysis were developed in Japan while trading rice, which is a commodity! Such a method has a proven track record, as well as the edge that distinguishes it from mere gambling on the market. It ignores the desire to establish order in the commodities markets and follows basic commodity trading info optimized with candlestick signals in a given commodity. When followed, such a method can give the investor the edge and the discipline to stay successful in commodities.
The ultimate responsibility of the commodities trader is to forsake the search for order in the market, find a method, such as commodity swing trading, to enhance success, and stay the course. Commodities trading is not the monster that many investors fear; with patience and discipline, it is a means for great financial success.
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