Back to School on the Futures

In the rough-and-tumble world of commodity futures trading, as with stocks, a correct call on price trend without the right timing will lose you money. This risk is compounded by the leverage involved. For instance, if you're bullish on the much buzzed-about corn market and want to participate in the current price rally using futures, you risk getting long in a mature bull market that's ripe for larger downside price corrections. Again, that's true of stocks, but because commodities move in such large increments, when the music stops, you could be left with nothing.

Remember that markets do not go straight up or down but tend to bob and weave. In futures markets, that bobbing and weaving can whipsaw a trader and quickly wipe out his deposit of margin money.

Still, the possibility of reaping large profits with the huge leverage offered in futures trading is understandably appealing to many investors. The key to achieving any success in the challenging arena of futures trading is to first understand the futures markets. Start by getting reliable information on futures trading and futures markets from the Commodity Futures Trading Commission and the National Futures Association, or my own Web site, TradingEducation.com.