What are the benefits of commodity trading

a. Price discovery from commodity market will aid farmers, exporters, importers manufactures and the government about the buy/sell decisions.

b. To producers: he can get the idea of the price likely to prevail at a future point of time which help him to select the commodity which best suits him

c. To consumer: he can get idea of price regarding which commodity will be available at which price

d. Hedging in commodity market help to reduce the risk  to industries, exporters, importers and all the participants in this market

e. Creates high liquidity in the market

The Process of Price Discovery in commodity market

Futures prices increase or decrease largely because of the myriad factors that influence buyers’ and sellers’ expectations about what a particular commodity will be worth at a given time in the future (anywhere from less than a month to more than two years).

As new supply and demand developments occur and as more current information becomes available, these judgments are reassessed and the price of a particular futures contract may be bid upward or downward. This process of reassessment of price discovery is continuous.On any given day the price of a July futures contract will reflect the consensus of buyers’ and sellers’ current opinions about what the value of the commodity will be when the con-tract expires in July. As new or more accurate information becomes available or as expectations change, the July futures price may in-crease or decrease.

Competitive price discovery is a major economic function—and, indeed, a major economic benefit—of futures trading. Through this competition all available information about the future value of a commodity is continuously translated into the language of price, providing a dynamic barometer of supply and demand. Price “transparency” assures that everyone has access to the same information at the same time.

What to Look For in a Futures Contract

No matter what type of investment you are considering, begin by obtaining as much information as possible about that particular invest-ment. The more you know in advance, the less likely there will be surprises later on. More-over, even among futures contracts, there are important differences which—because they can affect your investment results—should be taken into account in making your investment decisions.

Deciding How to Participate in commodity market

1. Trade Your Own AccountThis involves opening your individual trading account and with or without the recommendations of a brokerage firm or an independent Commodity Trading Advisor or Broker firms (in case of Nepal) making your own trading decisions. You will also be respon-sible for assuring that adequate funds are on deposit with the brokerage firm for margin purposes, and that additional funds are promptly provided as needed.

2. Have Someone Manage Your Account

A managed account is also your individual account. The major difference is that you give someone else—an account manager—written power of attorney to make and execute deci-sions about what and when to trade. He or she will have discretionary authority to buy or sell for your account. You, of course, remain fully responsible for any losses that may be incurred.

3. Participate in a Commodity Pool
Another alternative method of participating in futures trading is through a commodity pool, which is similar in concept to a common stock mutual fund. It is the only method of participation in which you will not have your own individual trading account. Instead, your money will be combined with that of other pool participants and traded as a single ac-count. You share in the profits or losses of the pool in proportion to your investment in the pool.

Why do more people loose in commodity market?

1. Many futures traders trade without a plan. They do not define specific risk and profit objectives before trading. Even if they establish a plan, they "second guess" it and don't stick to it, particularly if the trade is a loss. Consequently, they overtrade and use their equity to the limit (are undercapitalized), which puts them in a squeeze and forces them to liquidate positions.
2. Usually they liquidate the good trades and keep the bad ones. Many traders don't realize the news they hear and read has, in many cases, already been discounted by the market.
3. After several profitable trades, many speculators become wild and give up being conservative. They base their trades on hunches and long shots, rather than sound fundamental and technical reasoning, or put their money into one deal that "can't fail."
4. Traders often try to carry too big a position with too little capital, and trade too frequently for the size of the account.
5. Some traders try to "beat the market" by day-trading, nervous scalping, and getting greedy.
6. They fail to pre-define risk, add to a losing position, and fail to use stop loss.
7. They frequently have a directional bias; for example, always wanting to be long.

8. Lack of experience in the market causes many traders to become emotionally and/or financially committed to one trade, and unwilling or unable to take a loss. They may be unable to admit they have made a mistake, or they look at the market in too short a timeframe.
9. They overtrade.
10. Many traders can't (or don't) take the small losses. They often stick with a loser until it really hurts, then take the loss. This is an undisciplined approach...a trader needs to develop and stick with a system.
11. Many traders get a fundamental case and hang onto it, even after the market technically turns. Only believe fundamentals as long as the technical signals follow. Both must agree.
12. Many traders break a cardinal rule: "Cut losses short. Let profits run."
13. Many people trade with their hearts instead of their heads. For some traders, adversity (or success) distorts judgment. That’s why they should have a plan first, and stick to it.

14. They fail to pre-define risk, add to a losing position, and fail to use stops.

10 things to remember while maintaining trading journal

1. The general market conditions for that specific day. For example is there a lot of volatility in the market, is the market trading low or high, ranging or trending?

2. Why you entered the trade, the time you entered the trade, and the price you entered the trade.

3.Why you existed the trade, the time you existed the trade, and the price you existed the trade.

4. Wheather the trade was long or short

5. What happened with the market from the time you opened the trade to the time you closed the trade.

6. The money management parameters you used in the trade.

7. Many traders will also attach a chart with their analysis on it to help them remember the trade when they review their trading journal.

8. Where you were weak that particular day and what you are going to do to address the weaknesses.

9. Where were you strong that day and what you are going to do to address those strengths.

10. Any other thoughts that you had that day which should be noted.

About Bernanke-Chairman of the Federal Reserve Board of Governors; and his role

Who Is Ben Bernanke?:

Ben S. Bernanke was appointed Chairman of the Board of Governors of the Fedreal Reserve System in 2006 replacing Alan Greenspan. Congress appointed Bernanke for his knowledge of how monetary policy contributed to the Great Depression and his belief in inflation targeting.

He created many innovative Fed tools to prevent a global depression during the credit crisis. He led the Fed in taking on new roles, such as bailing out Bear Stearns and the $150 billion bailout of insurance giant AIG (American Insurance General). The Fed loaned $540 billion to money market funds to stop a global panic.

Why Is Bernanke Important to the U.S. Economy?:

Federal Reserve Chairman Bernanke is responsible for guiding monetary policy for the U.S. economy. This was more critical through the last decade, as fiscal policy became hamstrung (make ineffective) by a $12 trillion national debt, caused by a $500 billion annual deficit and $700 billion in military spending. As the spokesperson for the Fed, Bernanke is often seen as the country's premier economic expert, and his words can sway (move backward) the stock market and the value of the dollar. For this reason, Ben Bernanke is the most important person in the U.S. and, therefore, the global economy.

What Is the Role of the Federal Reserve Chairman?:

Although it is the Board of the Federal Reserve that sets policy, the Chairman has traditionally taken a strong leadership role. Since the Chairman is appointed for four-year terms, he is expected to be more independent than an elected official, who answers to voters. This allows the Fed to take a long-term view, and not react to short-term political pressure. That's because the Fed's tools, such as the Fed Funds Rate, act slowly over six months. The U.S. economy is like a large ship - it needs gradual direction. Stop- go monetary policy causes uncertainty, which was a major reason for the 1970's stagflation.

Bernanke and the 2008 Credit Crisis:

Under Bernanke, the Federal Reserve made very creative use of its tools. Prior Chairmen used only the Fed Funds rate - raising it to stem inflation or lowering it to prevent recession. Between September 2007 - December 2008, Bernanke decisively lowered the rate 10 times, from 5.25% to 0%. But this wasn't enough to restore liquidity to banks panicked by defaulting sub prime mortgages. These loans had been repackaged and sold them in mortgage-backed securities that were so complicated that no one really understood who had the bad debt.

FED Chairman Ben S. Bernanke