STUDENTS TRADING in
COMMODITIES FUTURES

No 'phony money' or 'playing' the markets. This is serious business, the best kind of hands-on learning!

Students are trading agricultural commodity futures and options at SDSU. The Economics Department offers that class, special topics: trading in commodity futures, to upper-level undergrad students interested in hands-on learning about commodity futures trading and the commodity markets.

"I think everyone should take this class if they are going to pursue a job in the livestock industry," said Kimball native Jesse.

Jesse took the class during the universities fall semester. He graduated in May with a bachelor's degree in animal science. "Learning to use the stochastics and the volume and open interest technical indicators in combination will be good for me since I will be working at home on a live cattle feedlot," he said.

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B. A. Qasmi, Asst Professor of Economics at SDSU, stressed that students "run" the class. He believes the instructor's proper role is to provide the structure that facilitates learning through individual and group research.

There is no time for Qasmi to "lecture," students even if he wanted to. Class time is taken up by group discussion and decisions, nor are there formal class exams or student testing.

Students are classroom graded on class participation and the 1-page futures markets tecnical and fundamental market analysis they submit at each meeting. An analysis explains the student's marketing proposal, tying in all available and relevant information relating to the commodity and using fundamental and technical price analysis to explain the short-run and long-run forecast for the commodity futures trading market.

The white paper also spells out exact wording of the proposed trading order, if any, and any trade contingencies. That requires college students to have better than merely superficial understanding of basic marketing education, trading and economic fundamentals, said Qasmi.

"2 traders can look at the same bar-chart and see 2 totally different things," commented fall class member Ben. Some traders see the importance of fundamental and technical analysis differently. I think you need a mix to have your best chance of correctly predicting what the futures markets will do, be it uptending markets, or downtrend.

"Even though all technical and fundamental indicators can point one-way, the markets can easily go the opposite way," agreed M. Michalek. "Traders speculating in commodities may be as risky as gambling."

Michalek graduated in December with an agriculturals economics degree and now works as an agricultural loan officer for Farm Credit Services of America.

Students can only learn trading by doing actual real-time trading, said Qasmi. "Trading knowledge and, better yet, trading experience is of great value in developing and implementing a marketing plan," said Qasmi. The hands-on experience gained in this class allows the producer to implement appropriate hedging and spread trading strategies free of additional anxiety.

Commodity Futures Trading Students use their own money for trading. Although not required, each of the 14 students in last fall's class as well as the instructor contributed $300 to form the "Super Ag Commodity Investment Club"—a commodity trading partnership pool.

Each member equally shares the trading profits as well as the trade losses from all commodities futures market trades, and has one vote on all decisions related to any trade, said Qasmi.

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A number of other universities offer similar classes, but only a few have students investing their own money, said Qasmi.

I strongly believe the best way to learn how to trade commodities successfully is by actually trading in real time and with real money, so each trade decision has financial consequences, said Qasmi. It's your money and your money matters! Most people tend to trade recklessly with phony non-real money."

The intensity with which the students followed the trading markets supported Qasmi's plan. Investing my own funds in the traders club forced me to pay attention to what was going on and made the class very realistic," said Michalek.

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For the previous 2 years, the commodity investment club generated a nice trading profit. However, the club lost trading equity money during its fall season class, the first group in the history of the commodities trading educational class to lose money.

Qasmi was a concerned about college students losing money in trading, but they do understand this is the cost of education and learning. It is still the cheapest way to learn commodities futures trading.

If the saying 'you learn from your mistakes' is true, we should be the smartest commodity investors in the world, commented Michalek. "Even though the experience ended with a financial trading loss, I would consider the class a success from the aspect of an educational tool."

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"Successful futures trading depends on one's ability to forecast the market, place the correct orders, and manage market risk," Qasmi said.

"Students will know more about the financial markets if they've tracked them closely for a few months than a Ph.D. in agricultural marketing who hasn't followed the commodity futures trading markets for some time."

However, college students in the class weren't quite as confident in themselves. "Before this class, words like trend lines, support and resistance points, retracements, open interest, and volume contained little meaning for me. After this class, I at least know the general uses of these technical tools," said Michalek.

And some students learn that trading's not for them. That is also a positive educational learning experience.

"I found speculating is much tougher than a person would think and that it's not something I want to do," added LeBrun. "As a commodity producer, using futures markets and options trading to lock-in prices and using them as protection is the route for me.

"Getting the hands-on education trader experience and actually buying and selling commodity futures markets contracts and using correct trader terminology as well as understanding the unspoken trading rules were valuable lessons to learn," said LeBrun.

The students divided into 6 study groups, each student group focusing on a different commodity and meeting 2 or 3 times/week. At every student class meeting, students from each student study group presented an analysis of the market and a proposal of action for their commodity. Depending on the education they learn from their fellow students, commodity traders club members voted on the course of action for each commodity market.

The trade orders were then communicated by the club secretary to Commodity Services, Inc., in Sioux Falls Iowa and its 1996 SDSU graduate in animal science. The open positions were then evaluated in the next class session.

Incidentally, he took the class the first time it was offered and has since joined the Sioux Falls business as a commodity broker and agricultural hedging consultant, reported Qasmi.

Commodities traded during the fall semester were corn, soybeans, wheat, live cattle, hogs, and feeder cattle. Note: However, much of the trading education and student experience is also applicable to other commodities markets, including stocks and stock index markets - such as the S&P market, bonds, currencies, metals, interest rate instruments, foreign commodities, energy/oil markets and other commodities futures trading financial markets.

Sometimes the trading stress and tension got pretty high in the room when traders money was being lost. I think that it is pretty funny when a proposal has unanimous approval and then loses money and people are upset at the group that proposed it, remarked student Troy.

An indication, students and the college professor agreed, that commodity trading is more than trading profits and making-money, or losing-money; it requires clear communications between people, a life skill and education SDSU students will use in any careers.

Qasmi said commodity trading techniques are universal. "If you've got the trading basics down, you do not need to stick to only agricultural markets," he stated.

And university students definitely learn trading basics in this class. A student named Robert may sum it up the best: "This class is a great educational tool to help a person understand the commodities trading markets," he said. "I have received more of an education from this college class than from any other marketing class I have taken. Many of the trader skills I acquired in this university class will be used in future market decisions I make."

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Article (slightly modified by website editor) Copyrighted by Jaimi Lammer.

Challenge: learning-by-risking in the futures markets...trading UPTRENDING COMMODITIES LONG (UCL) is the best way to trade profitably, be it position trades or day-trading!