If you don't mind losing $5000 in 10 minutes, you may take pleasure in trading commodity futures contracts. There's an old saying amongst commodity traders: "It's effortless to make a small fortune in commodities. Just start with a large fortune!"
This is not a business for individuals who are emotionally attached to their money, yet a large number of average "investors" get lured into the commodity markets every year. Why? Due to the possibility of making high percentage profits using the built-in leverage that is available to commodity futures traders.
The commodity markets include wheat, corn, soybeans, pork-bellies, precious metal, silver, heating oil, lumber, and numerous other common trade items. The massive firms that operate in these markets use commodity "futures" contracts to secure their selling prices for the item in advance of delivery.
This practice is called "hedging." On the other side of that transaction is the trader, who speculates on whether the value of the commodity will go up or down before the contract is due for delivery. Simply because futures contracts might be purchased using leverage, these financial instruments lend themselves to speculation.
As an example, control of a corn contract worth $5000 might only require $500 of actual cash, or 10% of the face value of the contract. If the corn company's market capital goes up in value, and the contract becomes worth, say, $5500, the investor has made $500 on his or her original $500, for a 100% return.
You can very easily see why investors in search of fast gains are hypnotized by the lure of massive earnings using maximum leverage in commodity futures trading. The real problem, however, is that the leverage works in both directions.
You'll be able to lose your entire investment in a matter of minutes because of the wild price gyrations that occasionally occur in these volatile markets. Let's imagine the $5000 contract drops to $4000 in value as an alternative to increasing.
You've not only lost the original $500 you put into the contract, but an additional $500. You can go broke swiftly this way.
So why do people play this game? Average investors do not wake up in the early morning and say to themselves, "Right, I think I'll start trading commodities."
What takes place is, they get a sales pitch from a commodity trading "guru" claiming to have a "system" for generating sure-fire profits in these wild markets. These "systems" range in cost from $25 all the way up to $5000 or more, and are sold based on the promise of "huge profits" from a small starting investment.
There is certainly no sure-fire way to consistently earn money in these markets, simply because the underlying commodity costs can swing wildly back and forth based on a complex set of variables, many of which are totally unpredictable.
You will find also a handful of successful professional traders who make a living in these markets. But the vast majority of people that dabble in commodity futures lose money.
Unfortunately, with the lure of substantial returns and quick money, a fresh crop of innocent traders enter the market each year, only to be swiftly fleeced out of their money.
Don't be one of them! Get professional help when raising capital in the stock market. You don't want to make an investment mistake and buy shell company stocks.
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