Trading commodities or Dow futures is exactly the same as
trading Forex, or anything else. Trading, as opposed to buying
shares, allows two big advantages. The first is that we can
profit from falling prices just the same as rising prices, by
selling first rather than buying. The second is 'leverage' which
allows us to effectively buy huge quantities with just a small
deposit. This means we can pocket a decent profit from a small
move up or down in price. Of course, this is potentially risky
but we always put in an automatic 'stop loss' to close the trade
should the price move against us by a set amount. Likewise, we
put in an automatic 'limit' to close the trade for a set profit.
Many Forex brokers also allow you to trade oil, gold and the Dow, so
setting up an account is no problem at all. Forex is mostly traded
on the MetaTrader 4 platform and this often includes these
instruments without people realising. In fact, most MetaTraders have
all sorts of additional instruments, often shares and sometimes even
including the DOW. To reveal these, you need to right click in the
Market Watch window (where the currency pairs are displayed) and
click on 'Show All'.
We obtain our signals from a free, everlasting demo version of
MetaTrader but you can actually place the trades anywhere you like,
including spread betting. The amount of capital you require varies
from broker to broker but most will trade mini contracts but you
need a minimum of a thousand dollars in your account. If you trade
the micro contracts (0.01 contracts) with AvaFX, you can actually
start with $100 but you won't get rich! Futures prices are
simply an estimated price for delivery at a set date in the near
future. It really makes no difference to our trading.
Here is how a typical trade for oil works. We see that the quoted
price is 81.50 - 81.56 so this means that we can buy at 81.56 oil
and sell at 81.50 - the difference in prices being the broker's
profit. We have a sell signal on our chart, so we sell 0.1 contracts
or $1 (or £1) a pip. Now, a 'pip' is the smallest movement, which in
this case is 0.01 or a one cent move. At the same time, we put in a
stop loss at 84.00 (250 pips up in the 'wrong' direction because we
are selling and want the price to go down) and a take profit of
76.50 (500 pips in the hoped-for direction). Then, we simply wait
anything from two days to a week, on average.
All this and more is fully explained in the 25 page illustrated
guide that comes with the Rich Lazy Trader system.
Recommended brokers are given at the bottom of the Home page.