What's More Volatile, Stocks Or Commodities?

If you said stocks, you'd be right. There's a big misconception that commodities or futures are more volatile and risky than stocks. The truth is, what makes commodities or futures appear risky is the leverage factor. You only have to margin up a small amount of capital, usually less than 5%, to control a large amount of capital. What that means is when the market moves even a small amount, you get a bigger return, or in some cases a bigger loss, on your money because of leverage. If you put up the whole value of a commodities or futures contract, you effectively de-leverage your investment and at the same time lower your risk and return.

For example, say you want to buy 100 ounces of gold. At the current price, you would have to pay $123,500 and you would own the gold. Instead, you could buy 1 futures contract of gold worth $123,500 and only margin up $4,400. Now let's say we have a $10 move in gold. On 100 ounces that would be worth $1000. As you can quickly see, the return on $4,400 is a heck of a lot higher than the return on $123,500 if you owned the gold outright. Which would you rather have, close to a 25% return on your margin on 1 futures contract, or have a $123,500 tied up in physical gold and see a return of less than 1%?

That, my friends, is why commodities or futures are interesting and can be very profitable when you approach the market with discipline. Naturally, leverage slices both ways and you could lose just as fast as you make money. The key here is to be diversified like our World Cup Portfolio.

Here's the 6 individual markets of the World Cup Portfolio shown quarter by quarter. As you can see, not every market made money every quarter, but combined every quarter was profitable. This underscores the power of diversification and disciplined trading. Continue reading "What's More Volatile, Stocks Or Commodities?"

Will This Magical Bean Produce Profits?

At the beginning of the second quarter, I put out a special report on gold and highlighted how the World Cup portfolio has had an 80% success record in that market during that time frame. I am happy to report that the second quarter of 2014 kept that winning streak alive with the recent move in gold and added to the profitability of the World Cup portfolio.

Well traders, as we rapidly approach the end of June and the beginning of the third quarter it is time to find out which market is going to be hot. Throughout the history of the World Cup portfolio (since 2007), the third quarter tends to be the killer quarter for soybeans.

In the past, using the strategy from the World Cup portfolio, soybeans has seen an 85% success rate in the third quarter. Now, that's not to say that this coming quarter is going to be 85% correct, but certainly the odds would favor that.

You can have access to the signals for the World Cup portfolio by joining MarketClub right here.

Here are the trading results for soybeans in the third quarter of every year since 2007, using the signals from the World Cup model portfolio strategy.

2007 $2,800.00
2008 $22,900.00
2009 $125.00
2010 $4,300.00
2011 $8,175.00
2012 $13,462.50
2013 -$650.00

As you can see from the numbers, 2008 was an outstanding year. Besides 2009 and 2013, most of the other years produced profits that were quite exceptional. As late as 2012, you would have produced a healthy return on your initial margin. Continue reading "Will This Magical Bean Produce Profits?"