Q: I've heard that commodity trading is risky. Can I really make any money trading?

A: Yes, I believe you can make money trading commodities. I have and I have a number of friends and clients who have made money trading - and I've had the pleasure of meeting a few people who have made a huge amount of money trading commodities! BUT… successful commodity trading requires that you control the risks of each and every trade you make - and that will require liquidating 50% or more of your trades at a loss - something that unsuccessful traders have a very hard time doing!

Q: How do you control the risks in commodity trading?

A: There are a number of ways including the use of stops and options but basically risk control requires that you have a contingency plan of action for whatever the market does. I always know where or why I will get out of a market, if I'm wrong, before I take a position. You can't control where the market goes but you can control what you do about it. My years of trading experience have proved to me that I've been wrong on market direction as much as 50% of the time. That means I absolutely must have a plan to limit the amount of money I lose if the trade goes the wrong way.

Another thing, most new traders over-trade - they will have too many positions given their account size or risk tolerance - and sooner or later the market will move hard against them and they will lose a lot of money in a hurry. My advice, therefore, is to keep your position size small when you are just starting out. If you learn how to be a good trader there will be lots of opportunities in the future to trade big size.

Q: Everybody has heard about Pork Bellies, but what are commodities, what markets can I trade?

A: These days just about everything. We have commodity exchanges all over the world trading all kinds of things. The biggest markets are the financials: different kinds of interest rates representing different countries and different maturities, all of the major currencies and all kinds of stock market indices. We also have a huge variety of traditional commodities such as precious and base metals, energy products like crude oil and gasoline, cotton, lumber and lots of different kinds of foods like sugar, coffee, wheat, corn and, of course, pork bellies, which everybody should know are slabs of bacon.

Q: How do I learn more about commodities and trading?

A: All of the world's major commodity exchanges have web sites like the Chicago Board of Trade www.cbot.com or the Chicago Mercantile Exchange www.cme.com or the New York Mercantile www.nymex.com that will tell you about the contracts listed there. MF Global has a great web site at www.mfglobal.ca that provides a lot of information including charts and quotes and research - we have a special section that includes daily audio reports from the exchange floors - contact our office (vadair@mfglobal.com) and we will give you the passwords required to get that information.

I love the Internet. When I started trading back in the 1970's I would go to the library and they had maybe a dozen books about commodities, now you can use the Internet to access thousands of sites that have commodity information. But the trick is knowing what to do with all that information - how can you use it to make money trading. Nobody, despite what they might tell you, knows what the market is going to do. There is no free money in the commodity market especially for new traders.

I think the best way to learn about trading is to find a commodity broker you can get along with and start to trade. Keep you size small and realize that successful trading is a marathon not a 100 yard dash. You will have to depend upon his experience to keep you out of trouble as you learn to trade but if you discover that you like trading stick with it - the rewards of being a successful trader are clearly worthwhile.

Q: How do I get started trading commodities?

A: I think you have to find an experienced broker who is willing to work with you - willing to help you learn to trade. On-line trading is fine if you're a very experienced trader but if you're just getting started I wouldn't recommend it - there's too many ways to lose money trading futures and options.

There are a number of "training courses" that new traders can take - Ken Roberts and Larry Williams for instance. These courses probably make trading look easier than it really is but at least they give people an introduction to the opportunities in the commodity markets.

I invite you to call our office and talk to one of our very experienced commodity brokers. Ask lots of questions. We can give you some of the great booklets we have about commodity markets or send you copies of our strategy and trading recommendation reports. We'd be happy to give you a trail access to the client section of our web site that contains tons of daily research reports and other valuable information.

There is a risk of loss in all trading strategies. Consider your financial condition before committing any money for speculative trading purposes.