Friday, April 13, 2007


I have to admit that I've been very interested in commodity trading lately. So much so that I set up a simulated trading account with Lind Walcot a few weeks ago to get a feel for it. The thing about commodity trading is the massive leverage involved. One typically only has to put up a fraction of the money it costs to control a contract for the commodity of interest. Such trades offer huge fortunes in a very short time, but also offer huge losses. In my simulated trade account I bought 50 Copper contracts. In a matter of 1 week my account went from $50,000 to over $280,000! I obviously don't have a trading stake that would allow me to take those kinds of risks, but it was a real eye opener. It isn't hard to imagine the trading going the other way and being $260,000 in the hole. That is scary! (Commodity trading is how Jesse Livermore lost all of his money. )

So in order to appease my commodity bug (gold has been doing very well for me lately), I purchased the DBA etf 3 days after the report stating that record amounts of corn have been planted. DBA is the a Powershares ETF that tracks the price of corn, wheat, soy beans and sugar. I'm not buying the DBA because I think corn is going up, but because I think that wheat and soy beans are going to skyrocket, mostly because of the record corn planted. If one adds any weather related issues, like drought or severe cold, all of the soft commodities will rise. That is my plan.

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