I gather from many of the emails I receive, and from the reading I do, that many new traders choose to trade the futures market. One of the hottest areas in futures trading today is gold. Thus, I suspect visions of riches fill the eyes of many new traders as gold continues to climb higher in these uncertain times.
I don’t trade futures because I am conservative with my money. I find value and return in the less risky portions of the market. Okay, that’s me, but others of you out there might have a larger appetite and greater tolerance for risk. If so, and you are just starting out, you might want to read an article that just came out in TraderPlanet Today. The writer, Kevin Davey, delivers some well-worn advice clearly and with authority in the article titled, Glitter Like Gold . You might want to check this out, especially if you are new, or you have had little success trading gold futures, or any futures for that matter. Below is a taste of both his content and style …
The key point to remember is not to get caught up with Gold fever, and realize that you likely will be trading against people who do this day in, day out, and have done so for years. They are pros at taking the money of new traders. Having been a new trader once, I speak from experience on this. So, if you are thinking of entering the Gold market for the first time, be very cautious. There are a lot of traders who know you are coming. And they are smiling.
Once again, I am following up on my tracking of the financials, as I have suggested you track the sector as well, if you want opportunity, that is. In the not-so-distant future, opportunity to make money in this beaten down sector will come. The trick will be to get in early enough to make the trades worthwhile and lasting. The way to do that is to know what the problems are and to tick them off the list as the big banks work though them.
One of the problems I have noted is that the big banks have relied on trading cheap bonds for profit, but with new regulations coming and cheap money going away, banks will have to go back to what they used to do to make profit, and that is making loans. The excerpt below is one more tick off the list …
JP Morgan, the second-largest U.S. bank managed to make more loans during the quarter than in the first quarter and added staff, signs that bright spots are emerging in a sector long plagued by credit losses and questions about future profitability. The bank’s shares rose in premarket trading. Bond trading revenue, long a profit engine for many banks on Wall Street, declined from the first quarter.
The above suggests big banks are following the path I have defined; however, in my opinion, the time to get in is not just yet. JP Morgan, and other banks, will move up on good earnings reports, such as the one that came out today for JP Morgan, but the list of problems is still long. Until that list gets much shorter, know that what goes up with the banks will go down. This is a short-term trading opportunity for sure, but I am looking for something bigger and lasting longer.
Trade in the day – Invest in your life …
