How to Make Money in Commodities

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HOW TO MAKE MONEY IN COMMODITIES:

The Successful Method For Today's Markets

by
Bruce G. Gould

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Second Edition, Revised.
© Copyright 1977, 1980, 1981, 1982 by Bruce G. Gould. All rights reserved. No part of this book may be reproduced in any form without permission in writing, except by a reviewer quoting brief passages for inclusion in a newspaper or magazine. Additional copies available from BRUCE GOULD PUBLICATIONS, P.O. Box 16, Seattle, WA 98111.
(ISBN 0-918706-05-9)

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CONTENTS

Preface

Acknowledgements

Section One:

Definitions and Basic Principles

 

Section Two:

The Method and the Markets

Section Three:

The Future is Now: Profits for the 21st Century

 

Appendix

I. Estimated Value of Commodities Traded
II. Volume of Trading In Futures
III. Contract Market Designations
IV. Futures Facts
V. Government Reports

Glossary

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PREFACE

      The business of commodity futures trading grew spectacularly throughout the 1970s and into the present decade. The value of commodities traded on the futures exchanges zoomed past the $2.5 trillion mark, dwarfing similar statistics for the New York Stock Exchange. The volume of trading in commodity futures set new records every single year from 1969-1980, racking up a 700 percent increase to nearly 80 million contracts (the unit bought or sold in futures trading). Clearly, thousands of investors had discovered the enormous profit opportunities in soybeans, wheat, gold, cotton, sugar, Treasury Bills, hogs and cattle. In fact, most of the 40 major commodities traded on the U.S. exchanges offered at some time returns of 100 percent or more on initial capital. Many, as this book will detail, brought astonishing profits of 3,000 or 4,000 percent of the original outlay.

      As is evident from the many actual case histories this book will examine, such profits are not unusual in commodities, nor are they reserved for an elite group of professionals. They occur frequently, and can be had by any trader with the method for spotting a certain kind of trend and properly capitalizing on it. The tremendous growth of the futures industry testifies to the fact that many average investors have found trading in commodity futures easier, more exciting, and more lucrative than investment in stocks, bonds, or other conventional instruments. These latter are essential to any sound investment program, but none can bring the returns, personal and financial, of futures trading. Unfortunately, many who flocked to the commodity markets suffered ruinous losses. These might have been avoided by

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the disciplined use of a single, simple approach to profiting through price changes.

      This book is not a complete guide to futures trading (a task I have attempted elsewhere). It is instead a brief introduction, and a handbook for developing one successful trading method. Commodity futures trading has been my life for the past 15 years. I began trading futures contracts while still a student in law school. Since then I have never ceased following the markets, for commodity profits are indeed gratifying. My career as a trader has convinced me that futures trading is a practical alternative for people from all walks of life - farmers, retailers, professionals, homemakers - who seek to increase their earnings.

      Commodity futures trading has been shrouded in a darkness of misinformation until quite recently. Many still believe it to be a hopelessly complicated and dangerous enterprise. I have tried to fill that information gap in my best sellingDow Jones-Irwin Guide To Commodities Trading, and to give concrete answers to traders' questions in my Commodity Trading Manual and in a bi-weekly newsletter, "Bruce Gould on Commodities." But my regular correspondence with traders - from beginners to seasoned professionals - still brings one insistent question: "Bruce, what really is the most successful technique you have developed for making money in the futures markets?" In the last 15 years I have tested a score of systems, and researched dozens more. My own time and money were spent in these efforts, testing different market strategies with my own risk capital. Out of these efforts came the answer to the question so many keep asking. This book presents that answer in a case-by-case review of actual price moves in the recent past that offered stunning profits when traded with the method you are about to learn.

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      This revelation should have two major effects. First, a great number of people should make a large sum of money as a result of carefully reading the following pages. You may well be one of them, and I hope that you are. Second, my answer to the posed question will undoubtedly upset a small group of professional "insiders" who have kept the secrets of successful trading to themselves in the past, and who would like to keep making money from the ignorance of the investing public. This book and my other writings are designed to change that situation forever.

      You will probably be amazed by what you are about to learn. You may even be frightened. Certainly you will be suspicious and unbelieving at first (as you should be concerning any investment opportunity). But the argument is a true one, and the facts speak for themselves. It is possible to make profits in the commodity futures markets running from 100 percent to 500 percent to more than 5,000 percent in a matter of weeks or months, and with an initial risk capital outlay of as little as $5,000. I have done it, and it is being done today on a regular basis by many traders. In small towns and big cities, on farms and in offices, traders with no expertise in crop forecasting or hog?corn ratios are making very healthy fortunes by patiently applying a simple approach to the movements of the markets.

      Upon completion of these pages, however, I do not suggest that you borrow money from the bank or cash in your life insurance policy in order to get started in commodities. Remember, the vast majority of traders lose money, mostly because of greed, impatience, and a lack of common sense. Many rush haphazardly into markets, trading fast and furious on the basis of rumors and intuitions, or according to some high-priced and "sure fire" system. The commission costs alone on all these trades are often enough to break the novice

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trader. I urge you to start very slowly. Commit only a small amount of money that you can comfortably afford to risk. Better yet, begin by trading only "on paper," keeping your money in the bank while conducting your paper trading exactly as if it were the real thing. Get a feel for how to spot a profitable trading opportunity, and develop the timing essential for getting in and out of your positions with maximum efficiency. Once you've mastered the technique on paper, and are showing consistent net profits, you are ready to join the ranks of the winning speculators.
      Good reading and good luck!

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ACKNOWLEDGEMENTS

First, I would like to thank the thousands who made the first edition of this book such a gratifying success. Their letters and comments have made a valuable contribution to my further studies of the futures markets, and deepened immeasurably my understanding of the average trader's needs.

I would like to dedicate this book to several very important people in my life, Fred, Doreen and Peter Pomeroy, David and Jan Gould, Harvey and Sally Cupaiuloi, Christine McComb, and the most wonderful mother a son could have, Grace Elizabeth Gould.

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Note: All commodity price charts reproduced in this book are courtesy of the Commodity Research Bureau, Inc., 1 Liberty Plaza, New York, New York 10006.

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