Suitable Markets

"You can have more influence
if you select the lightly traded markets."

Lightly traded markets tend to behave erratically, often for no obvious reason. They are affected by small incidents and changes and are therefore usually shunned by experienced traders.

The idea of a trader being able to influence a market is not very realistic and any urge to do so should be resisted.

Experienced commodity traders do not consider extravagant market strategies. Being generally conservative and risk averse, they tend to stick to 'proven' methods.

Selecting lightly traded markets is certainly an extravagant idea - these are the very markets you should avoid.

On the other hand, heavily traded markets are the ones you should seek. These will be more robust and steady - they are markets you can make money in - when they move. Heavily traded markets have their fair share of unpredictability but they are stable.

Stories about great risk takers should be taken with a pinch of salt because professional traders tend to be conservative.

New contracts in well established commodities are lightly traded when they commence. However, as the contract progresses, the volume of trade increases - probably later to become the most heavily traded contract for that commodity. This is a normal everyday event.

New traders are advised to stay away from these contracts at the beginning and only trade them when volume becomes heavier as they mature.

Market selection is perhaps the most important of all the tasks a commodity trader carries out. There are special methods for selecting markets.

Newcomers to trading should take the trouble to find out how the successful traders operate and what methods they use. It is now possible for anyone to do this.

In the meantime, be warned that lightly traded markets are best avoided.

 

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Copyright David Bromley 2006
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