Word: oils
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Dates: during 2000-2009
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Finally, are you ready to monitor the oil market 24/7 - to be peeking at your monitor even while kissing your spouse - and are you well stocked with ulcer medications? Yes, it is that easy. Now for the hard part: profit...
...oil-futures market is like a perpetual roulette wheel: red or black, up or down ... in the end, you're just betting on the direction of prices. And just as in roulette, the house will hold an advantage. In this case the house effectively consists of big players like Goldman Sachs who own supercomputers that can easily stay one step ahead of your moves. Also, since you're not a big player the action is going to come at a steep cost. You'll pay more in exchange fees and commissions than the big boys, and get less profitable prices...
...time to trade. So where do you start? With a clear idea of what you're trading: you're not trading oil. You're trading a contract obligating you to buy or sell it at a specified delivery date in the future. But don't worry: as long as the number of contracts you buy equals the number of contracts you sell, you won't have to worry about the physical barrels of oil...
...make money? If you sell oil at, say, $66 per barrel, and buy it back at, say, $65 per barrel, you keep the $1 per barrel difference. On one contract, or 1,000 barrels, that comes to $1,000. Not bad for a hard day's work. But take the other side of that trade - buy for $66 and sell for $65 - and you've lost a grand per contract. Remember that on both trades, you're going to pay high transaction fees and commissions, and you'll likely be forced to take a worse price in order to guarantee...
What, you have a brilliant plan to just buy and hold oil? Don't count on it. The bigger players know what you're thinking, and they'll drive the price temporarily down so you are forced to sell at a lower price - or risk losing more than you can afford. As the price falls, and all of the other "smart" traders around you are forced to unwind their long positions and sell oil, the price will fall even faster against you. Why would the big boys do this to you? Well, any money lost by one trader must...