Friday, April 29, 2011

How to Invest in Commodities?

If you want to include commodities as part of your long-term portfolio investment, below are the 5 common methods that guide you on how to invest in commodities.

The 1st way to invest in commodities: Spot Trading
Commodities trading can be done on the spot through "spot trading" where delivery takes place within a few business days. Spot trading is not the main way in which commodities are almost always bought in large quantities, few buyers would want to take the risk of accepting whatever the spot price is at the time of purchase, and immediately delivery.

The 2nd way to invest in commodities: Futures Trading
Commodity futures trading is the most popular ways of buying and selling commodities. Instead, most commodities are traded on futures exchanges such as NYMEX and CBOT. The prices of commodities are efficiently and transparently discovered through the participation of thousands of buyers and sellers.

Commodities futures trading have two mentalities:

One may speculate by taking a position, either long (buy) or short (sell) for example, a crude oil futures contract in the hope that the crude oil would rise or fall in price respectively, and to be profited in the expected price movement direction.
OR, an investor may hedge to mitigate the risk of a natural position in the commodity. For example, a soybeans farmer can insure against a poor soybeans harvest by purchasing soybeans futures contracts. If the soybeans crop is significantly less due to bad weather, the farmer makes up for that loss with a profit in the soybeans futures contract, since the overall supply of the crop is short everywhere that suffered the same conditions.
In futures trading, investors trade directly in commodities futures and encounter high level of risk not only because of the volatility of commodity prices. It also involves sophisticated skills, correct trading methodology, and dedicated time to follow the commodities market that is dominated by large commodity trading houses and financial institutions with professional traders.

The 3rd way to invest in commodities: Commodity index funds
Invest in commodity index funds are less risky than invest directly into commodity futures trading. Therefore, for investors who are looking into diversify their portfolios without wanting to trade directly into commodity futures, commodity index funds are good alternative investment choice. Some funds specifically track commodity indices like the Dow-Jones-AIG Commodity Index, the Reuters/Jefferies CRB Index, the Goldman Sachs Commodities Index (GSCI), and the Rogers International Commodities Index (RICI).

The 4th way to invest in commodities: Commodity unit trusts
For investors who are unit trust lovers. There are dozen of unit trusts investment funds available for retail investors. Some unit trusts generally invest broadly across the major categories of commodities. Some even focus on more specific sectors of the commodities market, such as gold & silver, energy, metals and agriculture. Therefore, for a better investment diversification, one can consider to add in commodity unit trust funds into the long-term investment portfolios.

The 5th way to invest in commodities: Commodity stocks
Lastly, investors can buy commodity stocks that are linked directly to light crude, palm oil, iron, copper, ore and energy related stocks to be profited directly from the stocks price appreciation. For example, Australian company BHP Billiton is one of the world's largest diversified producers of diamonds, coal, iron ore, aluminum, oil and natural gas.

Learn and understand about commodities investment. Add commodities investment as part of our long-term investment portfolio for a better investment diversification and assets allocation.
Visit Market Future Outlook - Daily Dow Jones review provides better Dow Jones market outlook.

Friday Trading Tip: Bearish Turning Point Expected


Hi traders,

CPO ended higher on Thursday at 3293vl with low volume traded. Seems like bearish dominating the sentiment finally....Likely bearish tone will significant if CPO level can sustain below 3300. Downside tone may develops if open <3300 and close <3290. CPO may upside bias if open > 3315 and close >3320. I'm expecting CPO may play 3250-3300 today. Pls take your position nicely...
Happy trading & Wassalam...

Just my 2cents

Thursday, April 28, 2011

How to Control Your Emotions

Congratulations! You have decided to venture into the capital markets! The first thing you need to know is that trading is an intense profession and your emotional control will be tested.
When the markets become unpredictable and sweat begins to form on your brow, will you know what to do? Don't worry! We are here to help! Read on for tips on how to control your emotions!

An Unexpected Market Environment

Let's say you have chosen to start your career as a Crude Oil trader. You expect the price to increase in the coming months due to news that China has started working on two strategic oil reserves. You execute a trade for five contracts at $85 a barrel. You expect your investment to return profits in the future but all of a sudden the price drops to $84 a barrel, then $80 and all of a sudden you see the price fall to $70 a barrel.
You start to panic and lose control of your breathing. Your palms get sweaty and you clench your hands together just to see the price drop to $68 a barrel. Before you change your trading strategy or panic anymore than you already have, take a step back from the situation and breathe.

Make The Decision To Have Emotional Control

Just like you made the decision to become a futures trader, you need to make the decision to control your emotions. This is something you need to think about every day. You have to make the conscious effort that you are not going to let your emotions get in the way of your trading. You also need to take steps to be in the right mindset once you have decided to control your emotions.
What are you feeling? Anxiety? Nervousness? Anger? Whatever it is you are experiencing, it could make sense to let it out. Talk to someone. Go to the gym and work out on the treadmill. Once you have released some of that negative energy, you will have a better grip on your emotions for your next trading session.
Also, get a good night's sleep and eat a healthy breakfast. These tips are often overlooked but undervalued. Having the right mindset to approach trading challenges is the first step in conquering your emotional responses.

Understand What Triggered Your Emotions

You can't help how you feel when something doesn't go your way but you can control your actions. The first thing you need to do is figure out what triggered your anxiety and nervousness. In this situation, it was the price movement and the potential risk of loss. By understanding what triggered your emotional response, you can plan for similar situations you might be faced with in the future.
At what price, were your emotions triggered? By figuring out your comfort levels, you can plan ahead for future trading strategies. If you got uncomfortable with your investment when the price of Crude Oil dropped to $80 a barrel, recognize that that will be your limit next time around.
Work your comfort levels into your trading strategy to prevent your emotional control from being tested.

Think Positive!

When you get frustrated or start to panic, your mind turns itself off from the learning process. Don't let your emotions get the best of you! Again, take a step back from the situation and try to relax. Concentrate on something that will calm your mind and lift your spirits. Breathe and think positive thoughts.
Instead of focusing on the price of Crude Oil spinning erratically out of control, focus on your trading account increasing from $10,000 to $15,000.

Close your eyes and picture the amount in your bank account going up. See the numbers on your bank statement increase in direct correlation to how many Crude Oil trades you make. As your bank account grows, think about what you are going to do with that money. Are you going to buy a Ferrari? Take your family on a cruise? Pay off some debt?
Whatever you do, do not panic! Being pessimistic will only hurt your chances of success.

Controlling Your Emotions

Trading professionally is an intense occupation but one you can succeed at with the proper preparation. When the markets react in a way you did not expect, take a step back from the situation. Breathe, gain your composure and make the conscious decision to have control over your emotions. Also eat healthy, sleep well and work out when you have a stressful day. It is important to get all that negative energy out to have a calm day the next time you trade. Finally, think positively!
Just remember that with any new career, there is going to be a learning curve. With our help, hopefully that learning curve won't be as steep!

Larry Levin trades the S&P 500 at the Chicago Board of Trade, now known as The CME Group; the world's largest and most diverse financial exchange. Levin is the Founder of Trading, a leading trading education firm specializing in empowering traders to achieve and surpass their financial goals. He appears regularly on CNBC, Fox Business News and other major media outlets worldwide.

Contact larry at 888-755-3846 or

Thursday Trading Tip: Expected Bearish Tone Testing Lower Support 3250


Hi traders,

CPO ended lower on Wednesday at 3277vl with low volume traded. Seems like bearish dominating the sentiment....Likely bearish tone will significant if CPO level can sustain below 3300. Downside tone may develops if open <3285 and close >3270. CPO may upside bias if open > 3300 and close >3315. I'm expecting CPO may play 32600-3300 today. Pls take your position nicely...

Happy trading & Wassalam...

Just my 2cents

Wednesday, April 27, 2011

Commodity Hedging - What Is It?

Commodity hedging is when a company decides to offset or eliminate risks due to the fluctuations in the raw material prices. This is a risk management strategy to protect against price fluctuations and against losses and well as protecting profits.

How does it work?
To begin with, let's explore some definitions. The cash or spot market is where you can actually buy or sell physical commodities. The futures market on the other hand involves the trade of contract, where it involves the physical delivery of the goods or commodities at the future date, where hedging can take place.
For example, if an aluminum producer expects the price of the raw material, aluminum to rise in the next two months, he will then enter into a long position of a futures contract to offset the increase of aluminum prices. Likewise, if he expects the price of aluminum to fall, he will enter into a short position in the futures market to sell in the futures market against the aluminum he holds.

Who will hedge?
Producers and manufacturers that are exposed to risks due to the volatility in commodity prices will see to hedge. In the case of Malaysia, it is a palm oil producing country, thus the majority commodity hedgers in Malaysia will be palm oil producers. They can enter the position in the futures market of Crude Palm Oil Futures (FCPO)

How to start hedging?
Hedging is the same as trading futures contract. One will need to enter into a position either long or short. The hedger will also have to pay a margin of the total contract value, which is usually 5-10% depending on the contract.

What about the risk?
As the producers are hedging against the physical goods, it is generally considered not risky if it is based on a short-term period. However, the hedger, if forecast the wrong price movement will lose out on potential savings.

Sheim Quah writes for Oriental Pacific Futures, a Malaysia-based brokerage authorized to provide futures broking services to institution and private clients since 2007. OPF specializes in futures broking, particularly Crude Palm Oil Futures (FCPO) traded on Bursa Malaysia Derivatives. Head on to this futures broker website or visit for more information.

Tuesday, April 26, 2011

Tuesday Trading Tip: Bulls vs Bears, 3400 Strong Resistant


Hi traders,

CPO ended lower on Monday at 3360lvl with low volume traded. Seems like bullish not strong enough to break 3400....Likely bullish tone will significant if CPO level can sustain above 3400. Upside tone may develops if open >3370 and close >3390. CPO may downside bias if open < 3355 and close <3350. I'm expecting CPO may play 3330-3380 today. Pls take your position nicely...
Happy trading & Wassalam...

Just my 2cents

Monday, April 25, 2011

Monday Trading Tip: Bullish Tone Continue Expected, Testing 3400

Thursday Trading Tip: Expected Bullish Tone...


Hi traders,

CPO ended higher on Friday at 3370lvl with high volume traded. Seems like bullish come back and diminished the bears sentiment....Likely bullish tone will significant if CPO level can sustain above 3400. Upside tone may develops if open >3360 and close >3390. CPO may downside bias if open < 3330 and close <3300. I'm expecting CPO may play 3360-3400 today. Pls take your position nicely...
Happy trading & Wassalam...

Just my 2cents