Article Watching the Smart Money

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Futures’ trading has been around for hundreds of years.  Even before Futures Exchanges existed trading was done by either a handshake or a forward contract.  Producers and Processors of Commodities both have always needed a way to protect against price risk.  The Producer, who owned the Commodity was concerned prices might drop before they delivered their product.  Processors always worry that price might rise before they purchase the Commodity to process and later sell.  Price risk is always a concern to these entities in the Futures markets.
These entities are comprised of Commercial traders who use a physical Commodity in their day to day business.  Commercial traders do approximately 60% of the daily volume in the Futures markets.  This makes Commercial traders the largest participant in the Futures markets, next is the Large Speculator and then the Small Speculator.
Commercials know everything there is to know about the Commodity they produce or process.  They specialize in...

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One thing that might help new Trader's understand the Commercials a little better is the fact that there are TWO types of Commercials. Lets use Corn as an example. The producer (the Grower) is worried about lower prices and to protect himself he's almost always SHORT THE MARKET. If things drop lower than his cost of production and he's short he can make up the loss, being SHORT. On the other hand, the other Commercial, lets say Kellogg's Ceral Company, is always worried about higher prices so he's almost always Long the Market. When higher prices start to cut into his profit margin and He's long the Market, he profits every penny the market rises. The BEST three books I studied on COT work is Commitments of Trader's Bible by Briese, Trading Stocks and Commodities with the Insider's by Larry Williams and Commitment of Trader's by Floyd Upperman....all excellent books. Hope this helps BENJAMIN SUHR
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