Market Timing

In commodity trading, being right about the direction of prices isn't enough. It is also necessary to anticipate the timing of market moves. The reason, of course, is that an adverse commodity price change may, in the short run, result in a greater loss than you are willing to accept in the hope of eventually being proven right in the market long run. Example: In January, you deposit initial margin of $1,500 to buy a May corn futures contract at $2.30--anticipating that, by spring, the markets price will rise to $2.50 or higher No sooner than you buy the contract, the price drops to $2.20, a loss of $500. To avoid further market risk, you instruct your commodity broker to liquidate your position. The possibility that the price recovers from this level or even climbs above $2.50 is inconsequential. The lesson to be learned is that when placing an order to buy or sell the timing a futures contract can be as important as deciding which commodity to buy or sell. In fact, it can be argued that market timing is the key to successful futures trading.

Past performance is not necessarily indicative of future results. The risk of loss exists in futures and options trading.

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