Most of the people who are interested in buying a commodity trading system usually fall into one of the three categories:
- They have tried to trade commodities on their own and have likely suffered heavy losses.
- They do not have the time, effort or knowledge to develop their own commodity trading system or trade full-time.
- They are looking for an easy way to make money in the commodities markets from buying a commodity trading system.
There are numerous commodity trading systems for sale that cost anywhere from about $50 to several thousand dollars. Most of the systems will likely claim to make spectacular gains every year trading commodities. The fact is that you will not know how good a system really is until you actually trade it for a period of time. Remember, there is no easy money to be made trading commodities. Those who are looking for the easy money are usually the ones who get burned by purchasing a bad trading system.
Hypothetical Returns from Commodity Trading Systems
There is a very distinct difference between “actual” returns and “hypothetical” returns. Actual returns means that someone opened a commodities account and took all the trading signals from the system. The profits or losses that the trader had at the end of the year would be the actual returns he made.Hypothetical returns refer trades that were just monitored and not actually placed with real dollars and real orders that went to the trading exchanges. Anyone who has ever traded commodities knows that you rarely get orders filled at better than expected prices and you often miss getting into markets, because the price moves too quickly. Therefore, you can expect your actual returns to be significantly less than the hypothetical returns.
Some characters will even sell systems that have never been traded and are purely based on hypothetical performance from past data that was custom-fitted to make the returns look too good. If you think about it, you can go back in history and have your back-testing software keep changing the variables that would have had the best returns over the last 10 years. The problem is that you “over-optimize” the system and the trading strategy will likely be a flop in the future.
Why Would Someone Sell a Highly Profitable System?
Realistically, you have to ask yourself why someone would sell you a commodity trading system that they claim consistently makes over 100 percent every year. If the system is so great, why would you let the whole world use it?There are several explanations to those questions. First of all, the trading system might be a piece of garbage and the developer is looking for some suckers to buy it. Or, sometimes system developers will only sell a limited quantity of their systems.
One of the best explanations is that a commodity trader could give away the holy grail of systems to the world and it wouldn’t have much of an impact on his success. The reasoning is that most people won’t have the discipline or patience to follow the rules exactly and they will likely have dismal results and toss they system.
To Buy or Not to Buy a Commodity Trading System?
I would be very careful buying any commodity trading system. Certainly, I would not buy any system that is hyping unbelievable profits of “100% returns every month!” Also, adjust your expectations much lower than what the system claims – returns are never better than the claims.You can do some research on FuturesTruth. They track the hypothetical trades from a number of trading systems and publish the returns. You will increase your odds of getting a better system from one that has at least shown consistent, hypothetical returns by a third party testing facility. Another option is to consult with a commodity brokerage firm like Trade Center that specializes in commodity trading systems and regularly trades them for their clients.
