| AUG 1985
Commodity Trading Risks by Allen D. Hanson
Commodity Trading Risks by Allen D. Hanson Few traders fully realize the risks that they are taking when they make a commitment in the futures market. They have learned all about charts, cycles, fundamentals, and basic trading theory, but when it comes to understanding the real risk, they simply don't comprehend the hazards involved. This is particularly true regarding the short side of the futures market. While this is often called the most profitable way to be in the market, the upside risk is still unlimited in theory at least, and the downside potential is limited to the full price of the commodity. Most amateur traders understand this but they don't fully realize the other major risk factors. They fall into five distinct categories. Political Risks This includes all new rules and regulations that cause immediate change in market value. If a foreign government fails or a new political party takes office, the security of the previous government is gone and commodity prices can respond very suddenly. In the United States that includes presidential succession or threat of war, interest rate changes and other government initiated fiscal policy. Even tight futures market spreads can go wild if a new rule becomes effective in between two different contract months. Weather Risk This includes storms, hurricanes, sudden freezes, prolonged hot or cold spells and other unpredictable influences on the market place. Some weather risks can be partially anticipated during certain seasons, but a sudden weather disaster can still move prices substantially and violate any chart pattern or seasonal trend.
by Allen D. Hanson
Technical Analysis of STOCKS & COMMODITIES
The Traders’ Magazine since 1982
has had over 1,226,237 subscribers from 174 different countries.
37,000 Page Traders’ Archive for $89.99
To continue reading, sign-up for trial access to Traders.com and the S&C Archive — 37,000 pages of trading ideas!
After verifying your email address, you will have limited access to the S&C Archive, as well as access to a Digital Edition of S&C, and access to Traders.com Advantage and Working Money for 30 days.
Not a subscriber to Technical Analysis of
STOCKS & COMMODITIES magazine?
Click
here to subscribe, or request
a trial subscription.
Log-in now to view articles from the S&C Archive.
Your Subscriber ID is located at the top of your magazine label, highlighted here in red.
Your last name can be found on the second line, highlighted here in blue.
*If you have a company name on the label, that can also be used. It will appear below your name on the label.
If you do not have a Subscriber ID on your label, you can find it on your statement or renewal form.
For help locating your Subscriber ID number, please call us at 1-800-832-4642 or send an email to Survey@Traders.com. If sending an email, please include your name and mailing address.