Underlying Truths about Commodities Trading Systems
There are procedures to follow when trading commodities.
Computerized programs or the commodity trading systems are
responsible for giving signals to the members when to sell or
buy commodity futures or options contracts. The system produces
the signals basing from mathematical formulas typically based
from the trading data including prices and trading volumes
involve in the technical analysis.
Trading systems that are based from technical analysis are
attempting to predict the price movements in the future basing
on price trends, price relationships and historical prices.
Do not rely too much on trading results being hypothetically
posted. Many promoters of commodity trading systems often
advertise hypothetical results. It is based from simulations of
trading using either the historical data prices or real time
simulated computer trading. Do not be fooled because
there are some promoters only pretend that they have traded
future contracts occurred in the past using the market
price.
They then procure calculations of trading results basing
from actual historical prices. The results are impressive,
showing trading results having huge net profits within small
marginal calls. Try to observe that the results do not reflect
the actual trading. There is no actual investment, no actual
profits, no actual future accounts, and no actual trading that
really happened. All are only simulation results.
Assess these inherent limitations of hypothetical results of
commodity trading.
- Hypothetical results do not go along 20/20 with the
actual or historical results. The results produced on the
trading system are not traded in the actual market so there
is a high probability of risks that a trader can face about
decision making. Actual price and demand of the commodity
and its supply could have greater impact if compared to the
hypothetical results.
- Real time posted on the results is not real.
Hypothetical results based their tested systems on
historical market data but trading in real time uses a live
feed data when a system trading is being tested.
- There is a financial limitation. Hypothetical results
do not take into consideration the trader’s ability of
meeting margin calls or absorbing the losses of the
trading. It already assumes that the trader who uses the
trading system can survive financial losses and meet the
results of margin calls. Remember that in reality, it is
very difficult for a trader to sustain unacceptable losses
and margin calls due to commodity trading thus this changes
also affects the trader’s decision whether to continue on
trading or not.
- The results posted are not tested under the real
condition of the market. It only assumes that specific
prices are used to buy and sell future contracts. Because
these assumptions are not based from the real market
condition, the systems can either underestimate or
overestimate its performance. Remember that in reality, the
execution of a trade is impossible to make in some of the
markets. The actual bid or asked spreads does not reflect
the actual prices as what is being posted in the
hypothetical results.
- There is a possibility of rigging results. Be cautious
because some promoters can display historical trades having
the best-yielded profits.
- The promoters failed to consider the cost of leasing or
purchasing the trading system.
Every individual should remember that in trading commodity
options or futures by purchasing a certain trading system
couldn’t guarantee profits. Commodity options and futures
belong to endeavors which are regarded as high risks so there
is no guaranteed trading system appropriate to gain
profits.
Commodity Trading
System.
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