Confessions of a Commodity Trader. My Luckiest Trade.

You can read more about me in my bio, but let me just briefly say that I have been trading for over 15 years. For the past 12 years, I have been the President of the WLF Futures, Options and Forex Education Network which is the top Google ranked site for the beginning futures trader.

I have made many trades over the years, but only once did I manage to buy at the low and sell at the high over a three-day period. It wasn't skill; it was pure luck. Here's what happened...

as an Economist of a major commodities exchange. I remember that it was a Monday and I had just placed a trade by phone - you couldn't trade over your computer at the time, this was many years back - though I can't recall in which market.

Two days later, I received a written trade confirmation by standard mail sent to my home address. Again, this was well before email was around so any activity in your account, such as trade activity, was confirmed by post. This was no big deal - I had confirmed the trade by phone on Monday - so I didn't bother to open the written confirmation until Friday night. That was a mistake...

expecting to see the usual entries for the trade that I had made on Monday and the corresponding adjustments to cash. And, in fact, I did see this. However, I also saw, to my horror, something else. Underneath my trade was the calm confirmation that I had also, that day, bought an April Live Cattle futures contract. Now, I had never even looked at the Live Cattle market, though I had seen live cattle before, and I certainly never traded it. That inescapable sinking feeling that accompanies all bad news was quickly returning but it didn't reach its climax until I read the fine print down at the bottom of the piece of paper that I was holding in my slightly shaking hands...

"Please check confirmations shown above and report any discrepancies. Failure to report within 48 hours shall imply your acceptance of the transactions above."

I was reading this on Friday night, well after the trade desk had closed and, since this would have to wait until Monday, well after the designated 48-hour period as well. It looked like this long position in Live Cattle was now mine.

I remember going to the gym that night and not being able to concentrate at all. All night I worried over this until I finally had an idea. Hmmmm, I wondered, at what price did Live Cattle close on Friday?

Saturday morning, I bought a financial paper to check prices - this was before prices were available on the Internet, indeed, even before the Internet was popular - and I was overjoyed to see that April Live Cattle had closed about 2 cents higher than the price at which I had allegedly bought. So, I resolved to do the following...

I would call the trading desk and immediately sell one contract, thereby closing at a profit this trade and simultaneously turning a lemon, as they say, into lemonade.

Monday morning came and I executed this operation without problem. Now the only thing to do was to wait for the trade report in my mailbox a few days later just as final confirmation of the success of my cleverly contrived plan.

And Tuesday, when I returned home from work, there was the envelope sitting in my mailbox. Hmmm... a little bit earlier than expected, but what the heck. With confidence, I opened it and read,

"This is to inform you that the purchase of one Live Cattle futures contract [last Monday] was attributed to your account in error. This transaction has been corrected and the Live Cattle purchase has been removed from your account."

Hmmmm..... unexpected is this... and unfortunate, to quote a wise, extragalactic teacher.

All at once, the implications of this innocent piece of paper hit me. The mistake last week that had started this whole episode had been corrected but the Live Cattle contract that I sold just a few days ago was without a doubt, absolutely incontestably, my trade and I would have to bear the consequences of that trade.

What had the price of Live Cattle done since I sold one contract on Monday? I hadn't even looked. It would have to wait until I got into the office the next morning.

and this time having no one to blame but myself. And all because of a dubious attempt to twist an accounting error to my advantage.

It was a long subway commute to work that morning and, along with the usual burden of the briefcase, I was weighed down by equal measures of guilt and trepidation. I entered the office, booted up the price reporting screen and... was once again overjoyed at what I saw.

Live Cattle prices had fallen starting almost exactly from my sale on Monday and were trading well below my selling price. When the market opened, I bought one contract to close this short position, and then watched as Live Cattle prices rallied strongly the entire day.

The result is that I had inadvertently, and without studying any charts or reading any news stories, sold Live Cattle at the high on Monday and then bought it back on the low on Wednesday. I made a 3-cent profit equal to $1,200 for the one contract. And that was my luckiest trade ever.

Despite all of my best efforts over the years since that Live Cattle trade, I have never been able to buy at the low and sell at the high again. Strangely enough, though, it has been easier to do the opposite (buy at the high or sell at the low), but that's a different story.

such as what happened in this Live Cattle trade, is something very easy to do with commodity futures. Most investors are comfortable with first buying and then later selling, hopefully at a higher price. But how can you sell first? How can you sell something that you don't own?

This is possible because a futures contract specifies deferred delivery. Today, I can sell a futures contract in wheat, for example, but I don't need to deliver wheat until that contract expires which could be several months down the road. From now until then, I can eliminate this obligation (close the trade) by simply buying back a wheat contract. And if I manage to buy it back at a lower price, then I will have made some money. For more clarification, you might want to visit some of the free educational resources below.

Ever thought about trading commodities? Probably anyone can do it and in fact, people are doing it from all walks of life. Some are dentists, others teachers, still others are construction workers or stay-at-home moms or dads. Some have university degrees while others, only a high-school diploma.

Who knows if you could be the next great trader.

The good news is that it doesn't cost anything, these days, to find out. You can get a solid education and determine for yourself if commodity trading is something that "fits" for you.

Below are a few free educational resources that I recommend. I only wish that they were available years ago when I first started!

All About Futures Trading

Abstract: The commodity futures market is essentially a wholesale market. It is comprised of many common, household items but the difference is that transactions are done in large bulk. For example, when you go to the grocery store to buy sugar, it is usually in five-pound bags. In the commodity futures market, you can buy sugar too, except that it is for 112,000 pounds! Here's another example...

Free Trading Guide for Beginners

Request this free educational package for the beginning commodity trader.

Hot Content for Traders

A great, free site that hosts trading videos, blogs and articles for traders, whether in stocks, futures, options or forex.

Getting a solid education is the most important step to becoming a successful trader, so take your time. The markets will wait for you, I promise!

Here are a few trading courses that I recommend. Actually, they are recommended by my clients as they are the best selling courses among the Network.

For the Beginner
Surviving in Today's Economy: A Practical Approach to High-Yield Investing

I designed this course for the beginner. It assumes that you have very little knowledge of futures trading. The course is affordable, only $45/month and you can cancel at any time. You'll learn a futures trading program that is designed for the beginner, complete with on-going and actual trade recommendations, and you'll have direct e-mail access to me for general support. You can get more information, enroll, and watch a few product video tours by clicking above.

For the Intermediate Trader
MarketClub: For Smart Traders

This service provides on-line charting, education and news but most importantly, it generates real-time buy and sell signals on a wide range of commodities, stocks and currencies - over 300,000 trading instruments in total. A green triangle means buy, a red one means sell. It's that simple. The service assumes that you already know how to enter orders and monitor your account. It is moderately priced, about $450/year. To see exactly what you get, and to view some free educational product videos, just click above.

For all Traders
INO TV: Streaming Educational Videos

Traders of all levels will appreciate INO TV's online digital library of video and audio seminars, the largest and most comprehensive such collection available anywhere today. These seminars present time-tested theories, techniques, and strategies from over 150 master traders including trading systems pioneers, trading contest champions, authors, trading coaches, and real floor traders. Delivered over your computer, it's an easy and convenient way for anyone to improve their skills and confidence. Priced at around $100 per year, INO TV is an excellent alternative for those who find the registration fees, travel expenses, and hotel charges prohibitive to attending live seminars. Click above for more info and to watch four free videos.

For Someone Who is Ready to Trade
Zero-Cost Futures Paper Trading

Paper trading, or simulated trading, is a way to test your trading skills without risking a dime. You should already have some education, a trading plan and even some money saved up to open your first account. Paper trading is the final step before the real thing. I only wish that this were available when I was starting out. This paper trading program is provided by the Futures Training Division of Alaron, a large and established commodity broker. They provide a great deal of personal support and assistance in their paper trading program.

My First Trade in Commodities.
They say that the worse thing to happen with your first trade is to make money. Apparently, it reinforces, so they say, unrealistic expectations that in turn will lead to financial ruin. Well, I can tell you from experience that losing on your first trade isn't so great either. Let me tell you my story...

The Real Mystery.
There is something that is a real mystery about commodity trading. It's something that I became aware of years ago, and it's the reason I started to trade in the first place. I believed that if someone could crack this mystery, then they'd have a trading edge over others. And I still think the same to this day...