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If you do not mind losing $5000 in 10 minutes, you may enjoy trading commodity futures contracts. There's an old saying amongst commodity traders: "It's easy to make a small fortune in commodities. Just start with a huge fortune!"
This really is not a business for individuals who are emotionally attached to their income, yet thousands of average "investors" get lured into the commodity markets every year. Why? Due to the possibility of making high percentage gains using the built-in leverage that is readily available to commodity futures traders.
The commodity markets include things like wheat, corn, soybeans, pork-bellies, precious metal, silver, heating oil, lumber, and various other common trade items. The huge companies that operate in these markets use commodity "futures" contracts to secure their selling prices for the product in advance of delivery.
This practice is called "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 just before the contract is due for delivery. Because futures contracts may be purchased using leverage, these financial instruments lend themselves to speculation.
For instance, control of a corn contract worth $5000 may only require $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 initial $500, for a 100% return.
You can easily see why investors in search of fast gains are hypnotized by the lure of huge profits using maximum leverage in commodity futures trading. The real dilemma, however, is the fact that the leverage works in both directions.
You'll be able to lose your whole investment in a matter of minutes due to the wild price gyrations that sometimes occur in these volatile markets. Let's imagine the $5000 contract drops to $4000 in value rather than increasing.
You've 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 today 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 takes place is, they receive a sales pitch from a commodity trading "guru" claiming to have a "system" for producing sure-fire earnings in these wild markets. These "systems" range in cost from $25 all the way up to $5000 or more, and are sold according to the promise of "huge profits" from a small starting investment.
There is no sure-fire way to consistently earn money in these markets, simply because the underlying commodity costs can swing wildly back and forth depending on a complex set of variables, several of which are entirely unpredictable.
You will find also a handful of successful skilled 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 enormous returns and easy money, a fresh crop of innocent traders enter the market every year, only to become swiftly fleeced out of their income.
Don't be one of them! Get expert 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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