The physical demand for commodities continues to be strong as world demand for all sorts of commodities, from metals to oil to grains remains high. While demand in the US seems to be declining due to a soft US economy what takes place in the US market is not as important now as it was a decade ago. The rapid growth of the economies in places like China, India, Brazil, and Russia, are keeping the upward pressure on commodity demand.

While we are probably less than half way along in a commodity bull market trading commodity futures and options trading is not suitable for everyone. Commodity futures are highly speculative. If you decide to go after the high returns available from trading commodities you should only use investment capital that you can afford to expose to such investment activity. That is trade only with capital that you can afford to lose. Commodity futures are derivative, short-maturity claims on real assets. Many commodities have pronounced price/volatility seasonality as well as being subject to rapid fluuations in daily prices. If you have a heart condition do not attempt to trade commodities.

Commodity futures spread trading offers an exciting path for potential profits often overlooked by futures traders. However, if you think you are going to make a fast fortune trading spreads or any other futures product in the commodity casino, why not just donate your money to your favorite charity instead of handing it over to the “pit vipers” on the trading floor? When you trade commodities you are up against some of the smartest, most ruthless traders in the world. You need to be well prepared to trade commodities at a profit.

While the Commodity Futures Trading Commission ( CFTC ) is responsible for insuring market integrity and protecting market participants against manipulation, abusive trade practices, and fraud the CFTC will not protect you from sudden and at times drastic changes in price levels. Your favorite commodity may still be in a roaring bull market but if you are over leveraged a sharp correction within the trend could still wipe you out.

Traders are often unprepared to deal with a string of losses in spite of the fact that this is part of every trading system. They often begin with less trading capital than is realistically required in order to survive a period of draw down. To attempt to improve their trading systems commodity traders can test their skills going back to past periods and stepping through daily and weekly price charts one day at a time. Each day forward charts update and the trader can see how well they did and how well their tools and strategies did in anticipating market movement.

Investing in the futures market and or stock market is risky and with futures you can lose more then your initial investment. Skilled investment management professionals have been using managed futures for more than 20 years with positive results. With practically a zero correlation with stocks, one of the most attractive features of managed futures is its ability to add profound diversification to an overall investment portfolio. Still it remains a risky business that requires a lot of skill and self discipline if one is to trade at a profit.

The oil market has been the big mover over the past year or so. Oil traders and hedge funds began to purchase extra oil at current prices. The surge in demand, linked to perceived trends in the futures market, generated an upward pressure on current prices. Oil is priced in dollars, which makes it more affordable for foreigners paying with stronger currencies. While oil speculators may have played some role in pushing oil prices higher the US government and its policies that lead to a weak US Dollar is much more responsible for high oil prices than the speculators who are merely following the bull market trend.

Since most oil market transactions are priced in US Dollars as the Dollar falls it supports higher prices for oil and all other Dollar denominated commodities as well as finished imported goods. Unfortunately, most US congressmen and the executive branch of the US government would rather point fingers at oil company executives and at oil market traders than take a realistic view that it is their own misguided policies that have unleashed the inflation monster on the world’s commodity markets.

It is a highly interesting although dangerous time to be trading commodity markets. That is not to say that the skilled, well capitalized trader will shy away from commodity markets under present highly volatile market conditions. They will not. Experienced successful traders will probably do very well in markets that have a bullish basis that will likely last for many years. They will use the sharp corrections within the trend to reestablish positions or to put on additional positions at better prices and ride out the mega trend to outstanding profits.