A Trader's First Book on Commodities An Introduction to The World's Fastest Growing Market

by Garner, Carley

• ISBN13: 9780137015450
• ISBN10: 0137015453
• Edition: 1st
• Format: Hardcover
• Copyright: 2010-01-07
• Publisher: Ft Pr

Summary

Trading commodities requires traders to have significant knowledge before they begin trading. While most books focus on the history of commodities, basic technical analysis, elementary option education and hedging, this book will educate readers on gaining access to the markets and avoiding common pitfalls in doing so. Candid and practical, Garner covers market analysis and strategy, but is primarily focused on other neglected, crucial issues that are likely to determine whether you generate profits or losses. Drawing on her extensive experience teaching traders at all levels of experience, Garner helps you understand how to calculate profit, loss and risk in commodities, and choose the best brokerage firm, service level, data sources, and market access for your needs. She demystifies the industry's colorful language, helps new commodity traders clearly understand what they're buying and selling, and explains the entire trading process - thereby closing the gap between broker and trader, and helping traders eliminate costly mistakes and misunderstandings. The book concludes with a refreshingly new and different look at traditional topics such as trading plans, coping with margin calls, and maintaining emotional stability as a trader. If, like thousands of investors, you're interested in moving into commodities, this is simply the best book to get you started.

Author Biography

Carley Garner is Senior Market Analyst and Broker with DeCarley Trading and a columnist for Stocks & Commodities. The author of Commodity Options, Garner writes two widely distributed e-newsletters, The Stock Index Report and The Bond Bulletin.

 

Her work has been featured in Stocks & Commodities, Futures, Active Trader, Option Trader, Your Trading Edge, and PitNews Magazine. She has been quoted in media ranging from Reuters to Investor’s Business Daily and The Wall Street Journal. Garner provides free trading education to investors at www.decarleyrading.com.

 

Table of Contents

Introduction     The Rise and Fall of Commodities      1

A Commodity Rally for the History Books      1

A Day of Reckoning      7

The Speculators’ Role      8

Fortunes Made and Lost      10

Conclusion      13

 

Chapter 1:        A Crash Course in Commodities      15

How It All Began      15

The CME Group      17

Evolution of the Forward Contract into a Futures Contract      18

Cash Market Versus Futures Market      21

Contract Expiration      23

The Mechanics of Futures Contracts      25

Futures Spreads      32

A Brief Introduction to Commodity Options      33

 

Chapter 2:        Hedging Versus Speculating      37

Commodity Hedgers      37

Commodity Speculators      42

 

Chapter 3:        The Organized Chaos of Open Outcry and the Advent of Electronic Trading      45

The Pit      46

Electronically Traded Markets      47

“Side by Side”      48

Costly Commodity Quotes      54

Open Outcry Quote Reporting and Access      54

Electronic Quote Transmission      56

Subscribing to Quotes      57

Charting      58

Free Trading Platforms and Market Access      58

Paid Trading Platforms      59

Auto Approval Versus Manual Approval      60

Order Desk (“The Desk”)      62

Is It Worth Paying Platform Fees or Subscribing to Quotes?      63

 

Chapter 5:        Choosing a Brokerage Firm      65

Introducing Brokers, Futures Commission Merchants, and Broker/Dealers      66

Fill Quality      69

Behind the Scenes of Transaction Costs      70

Discount Brokerage or Full-Service Specialization      71

What You Should Know About Commission Structure: Blanket or Variable Rates?      72

Market Access      75

Beyond Your Broker      77

Conclusion      79

 

Chapter 6:        Finding a Broker That “Fits” and Choosing a Service Level      81

Understand Your Broker’s Business      83

Get to Know Your Futures Broker      84

Full Service Broker or Self Directed Online?      88

Why Using a Broker May Be a Good Idea      90

Conclusion      93

 

Chapter 7:        Order Types and How to Use Them      95

Order Types      95

Placing a Trade with Your Broker      108

Placing a Trade Online      111

 

Chapter 8:        Making Cents of Commodity Quotes      113

Quoting Grain Futures      115

Not All Grains Are Created Equal      119

The Meats      122

Foods and Fiber      125

Precious Metals Futures      130

Gold, Platinum, and Palladium Futures      131

The Other Metal Futures      133

 

Chapter 9:        Figuring in Financial Futures–Stock Indices, Interest Rates, and Currencies      137

The Boring but Necessary Basics      137

Stock Index Futures      138

Dow Jones Industrial Average Futures      141

NASDAQ 100 Futures      143

S&P 500 Futures      146

Russell 2000 Futures      151

Interest Rate Futures      151

Treasury Bond and Note Futures      153

Eurodollar Futures      164

Currency Futures      167

Conclusion      170

 

Chapter 10:      Coping with Margin Calls      171

What Is Margin?      171

Day Trading Margin Versus Overnight Margin      172

How to Handle a Margin Call      173

The Margin Call Countdown      175

Accepting Margin Calls      177

 

Chapter 11:      The Only Magic in Trading–Emotional Stability      179

Three Emotions in Trading: Fear, Greed, Frustration      181

Revengeful Trading Is Counterproductive      187

Capital Preservation aka Risk Management      188

 

Chapter 12:      Trading Is a Business–Have a Plan      189

The Trading Game Plan      190

A Trading System Alone Isn’t a “Business Plan”      191

Constructing a Business Plan in Trading      195

Price Speculation (Ideally Prediction)      196

Choosing a Trading Vehicle      198

Risk Management      199

 

Chapter 13:      Why You Should Speculate in Futures      207

Speculating in Futures Versus Speculating in Equities      208

Risk Capital Only      214

Conclusion      215

 

Chapter 14:      Futures Slang and Terminology      217

Bull Versus Bear      217

Spread      219

Contract Month Slang      220

Red Months      220

Fill      221

Blow Out      222

Blow Up      222

Keypunch Error      222

Busted Trade or Moved Trade      223

Net Liq      224

Equity      224

Beans      225

Commodity Currency      226

Dead Cat Bounce      226

Bottom Fishing      227

Chasing the Market      227

Limit Moves      228

The Tape      228

Trading Solution and Front-End Platform      229

Proprietary Trading      229

Running Stops      229

Short Squeeze      230

Babysitting      230

Scalp      231

Slippage      231

Working Order      232

Unable      232

Handle      232

Overbought/Oversold      233

Debit/Account Debit      233

Round Turns      233

Trading Environment      234

 

Index      235