Regardless of how many people lose money in the commodities markets there will always be losers. And the only way to win is to know exactly what is happening and what is next in the markets. To do this firstly one must refer to historical charts reflecting price per date fluctuations in the market of interest particularly when activity is high. Having reviewed 25 year charts, 5 year charts and 1 year monthly charts one can see a pattern. The pattern is for markets of any kind to be low and cheap with little interest or activity for years at a time. Obviously not the time to invest. Or is it?
The bigger picture shows that if you have the cash, this is exactly the time to invest. What could be better? No one else buying or selling is the perfect time to grab it all at a discount. In the biggest picture this is exactly what happens. Conglomerates and mega wealthy financiers “accumulate”. They will buy your futures contract, option, stock, commodity, what ever when the price is low. The adage “buy low sell high” holds true here. However the old adage is not complete. It should say “buy low in quantity at a bargain discount lot price” and forget selling. What I mean is that “smart money” will buy in quantity at a bargain discount lot price and they can then distribute, trade, use as collateral, monopolize to drive up the price etc. so why sell when there is so much more you can do.
So basically the smart money in commodities markets and markets of all kinds will use the two to three years or more of bumping along the bottom to accumulate, dominate and monopolize to drive up the price and the proof of this is a typical chart formation where suddenly prices break and gradually head upward. Because the smart money is still buying not selling any fluctuation in this upward trend is solely meant to shake out the remaining contracts or shares for a better hold as prices continue to be “marked up”. Actually this phase of market movement after “accumulation” has been coined “mark up” by the late millionaire investor Ted Warren and the process was described in his book “How To Make The Stock Market Make Money For You”. Mark up continues until it becomes untenable to try to drive the price higher and “insiders” will begin to sell off or “distribute” all that was accumulated during the accumulation phase and marked up during the mark up phase.
Commodities charts indicate among other things market activity and distribution is a very active time with mostly selling at the top going on with the general expectation of prices headed UP! Hold on. If the market is in a sell off at high prices, the next phase is going to be MARK DOWN and this is the prime investors opportunity to make a fortune by following along with what the major investors are doing. Mark down occurs swiftly and without notice but occurs in direct proportion to how much stock or commodity is in the general public where there can be no agreement on what the price should be or how to keep from selling out cheaper and cheaper to cover losses. This is exactly what happens to almost everyone who invests when the market gets HOT! They buy when they should sell. And mark down is much faster than mark up so it is a better way to win in the markets in less time.
So how do you, the small time investor cash in on the “Big Picture”? You are going to buy put options in the commodities markets or short the markets you find in the distribution phase and buy time to allow the market to drop and hang on because it will. Once put options are purchased with time in them there is no further risk and before they expire they need to be repurchased and you can shop for the best ones. There is no doubt as to the movement of markets if you refer to any market’s 25 year chart. To make money, sell with the big money and gain the benefits of riding the waves to your bank
Ted Warren “How To Make The Stock Market Make Money For You” formerly republished by Ken Roberts Company.