Trading Commodity Futures Is Risky, but Can Be Lucrative

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Trading commodity futures is risky, but can be lucrative. Val Harrison, a retired Birmingham veterinary surgeon, went from being a novice to retiring from practice in a short space of time. "I started commodity trading at the end of 1972 and by 1978, aged 50, I had made sufficient money from commodities to retire from practice and so I did just that."

Harrison has written a book focused on commodity trading, called Speculate, Accumulate, Increase Your Income, which is aimed at the UK trader.

A commodity future is something for which a price is quoted on the day you trade, for delivery at some future date. How far in the future varies with different commodities. With the London-quoted base metals it is never more than three months, but with softs it can be 18 months or more.

When you place the order with your commodity broker, you will ask him to buy or sell one or more lots of the commodity in question.

Commodities are quoted in US dollars, except cocoa, wheat and barley, which are quoted in sterling. Those quoted in dollars can be affected by the dollar/pound exchange rate, apart from any other factor.

Trading is effected by a commodity broker. There are many of these and commission charges vary. The golden rule is to negotiate before you begin trading.

For prices, you can look in the Financial Times or on a host of websites. There are cash prices - what you would pay to buy a commodity now - and three-month prices, which is what you would be charged today for delivery in exactly three months' time. …