If you don't mind losing $5000 in 10 minutes, you may enjoy trading commodity futures contracts. There's an old saying among commodity traders: "It's effortless to make a small fortune in commodities. Just begin with a huge fortune!"
This really is not a business for people that are emotionally attached to their money, yet thousands of average "investors" get lured into the commodity markets every year. Why? Because of the possibility of making high percentage profits using the built-in leverage that's readily available to commodity futures traders.
The commodity markets include things like wheat, corn, soybeans, pork-bellies, precious metal, silver, heating oil, lumber, and numerous other common trade items. The huge companies that operate in these markets use commodity "futures" contracts to lock in their selling prices for the item in advance of delivery.
This practice is referred to as "hedging." On the other side of that transaction will be the trader, who speculates on whether or not the value of the commodity will go up or down before the contract is due for delivery. Because futures contracts may be purchased using leverage, these financial instruments lend themselves to speculation.
For example, control of a corn contract worth $5000 might only demand $500 of actual cash, or 10% of the value of the contract. If the corn company's market capital goes up in worth, and the contract becomes worth, say, $5500, the investor has made $500 on his or her original $500, for a 100% return.
You can easily see why investors in search of fast gains are hypnotized by the lure of big earnings using maximum leverage in commodity futures trading. The actual dilemma, however, is the fact that the leverage works in both directions.
You'll be able to lose your entire investment in a matter of minutes due to the wild price gyrations that sometimes occur in these volatile markets. Let's say the $5000 contract drops to $4000 in value as opposed to increasing.
You have not only lost the original $500 you put on the contract, but an extra $500. You can go broke swiftly this way.
So why do people play this game? Average investors do not wake up in the morning and say to themselves, "Right, I think I'll start trading commodities."
What happens is, they get a sales pitch from a commodity trading "professional" claiming to have a "system" for producing sure-fire earnings in these wild markets. These "systems" range in value 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 no sure-fire way to consistently make money in these markets, simply because the underlying commodity prices can swing wildly back and forth based on a complicated set of variables, several of which are entirely unpredictable.
You can find also a handful of successful professional traders who make a living in these markets. But the vast majority of people who dabble in commodity futures lose money.
Unfortunately, with the lure of huge returns and quick capital, a fresh crop of innocent traders enter the market every year, only to become swiftly fleeced out of their money.
Don't be one of them! Get expert help when raising capital in the stock market. You don't want to make an investment error and buy shell company stocks.
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