The commodity markets are intriguing. This gives you great leverage with a small deposit. In the equity markets, the buyer must put up at least half of the value of the stock they purchase. The buyer has to borrow the remainder of the money and pay interest. To own $10,000 worth of stock, you need to have $5,000 of cash plus borrow $5,000. You are 50% leveraged.

To control one contract of corn worth over $10,000 you need to put up $475 cash (2/6/01). You don’t have to borrow the rest of the money. You control the contract for approximately 5% of its value. You are HIGHLY leveraged, approximately ten times more than in the stock market.

The commodity market has margin calls. Your initial deposit has to be maintained. If the trade starts to work against you, you will have to make up your losses immediately. The margin call lets you know how you are doing. Many people do not like this, but margin calls are your friend. It tells you if you are losing money. Margin calls force you to manage your money.

• Cut your losses short.
• Risk no more than a certain amount of money on any one position, no matter what the apparent profit potential.
• Use protective stops.
• Never trade the spot month.
• Capital PRESERVATION is infinitely more important than Capital APPRECIATION.
• Do NOT add to a losing position.
• Do NOT spread a loss, because all you are doing is locking in a loss on one leg.
• Do NOT trade thin markets.
• Do NOT be greedy: Bulls make money. Bears make money. Pigs get slaughtered.

Commodity trading is not suitable for everyone. While there is potential for profit, there is an equal chance for loss. Past performance is not related to future performance. You need to understand your personality before trading.