How to Play the Commodities Markets

I have spent the last several years working very hard through my writing, public speaking and media appearances to bring commodities to investors who have always been interested in resource trading but didn't know where to begin. That dearth of knowledge is what led me to write A Maniac Commodity Trader's Guide to Making a Fortune.

Dispelling the myths that engulf commodity trading and helping investors throw aside a deep-seated fear of trading a sector is not an easy task. The image of a person in his or her driveway getting a delivery of a truckful of orange juice or corn after trading commodities is still how some investors perceive the futures markets.

In the past, the viewpoint on commodities, at least when I started on Wall Street in 1989, was that it was simply a form of gambling and was not on the same playing field as the equities markets. Few mainstream brokerage firms would even go near these markets, and fund managers avoided them like the plague.

But the commodities markets have evolved and grown into powerhouses of their own. The exchanges -- Chicago Mercantile Exchange(CME Quote - Cramer on CME - Stock Picks), Chicago Board of Trade(BOT Quote - Cramer on BOT - Stock Picks), New York Board of Trade (NYBOT), New York Mercantile Exchange(NMX Quote - Cramer on NMX - Stock Picks) and others -- have had a whirlwind of IPO and merger deals in just the last few years. Wall Street and fund mangers have jumped on the bandwagon as commodities and the natural resource markets become more and more popular with and profitable for investors worldwide.

Digging Deeper for Profits

The commodities industry has seen a revolutionary change due in large part to accessibility. Today the Internet provides a wealth of information and access for investors interested in commodities, something that was virtually nonexistent 20 years ago. New brokerage firms and technology from companies such as Interactive Brokers offer equity and commodities traders equal access to both. This is the trend of the future.

Brokerage firms that have experience trading commodities have flourished or been gobbled up in consolidation. The trading game continues as the industry continues to see change. More and more markets go electronic, and the old trading pits in Chicago and New York, where I cut my teeth, seem to be going the way of other nostalgic things like the automat and drive-in movies.

The good news for investors is all of this technology and access makes these brokerage firms more competitive and hopefully leads to lower commission rates for investors. In addition, the traditional firms that in the past would never have considered handling commodities brokerage now have realized what they've been missing and are offering both commodities and equities to their clients.

In the past, the image of a commodities trader was someone who had millions of dollars and traded pork bellies while sailing around on his yacht. Not so today. While there may still be millionaires on their yachts trading the meat markets, the truth of the matter is that resource markets in everything from orange juice to copper and sugar to gold are enticing investors of all investment levels. It's possible to open a commodities trading account with as little at $1,500 today and get commissions as low as $7 or less.

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