That concludes our discussion of the basics. If this is your first exposure to commodity trading, you now know just enough to be dangerous. If you're a novice, hopefully this has shed some light on the game. If you've traded awhile, this is probably nothing new, but you'll find a lot of new and exciting stuff in subsequent chapters.
Let's conclude this chapter with a true story that happened to a commodity broker friend of mine. Remember, it is a common practice (and a good one) to place your stop loss order at the same time you place your trade. A good broker will remind you of this. There is a belief that the floor traders will "run the stops." I'll talk more about this later in the book. However, I've found that the proper and judicious use of stops is essential to successful trading. The best markets will never reach your stop. I cannot count the number of times in my personal trading a stop has prevented a bad trade from turning into disaster.
My commodity broker friend Tim tells the story of Elmer, a farmer client of his from rural Minnesota. Tim suspected Elmer was growing a bit feeble, but then again, Elmer had been trading for many years, and he had always been the eccentric type. Tim recounts the day that Elmer called him up prior to the market open.
Elmer to Tim: "Tim, a miracle happened to me this morning."
Tim to Elmer: "What's that, Elmer?"
Elmer to Tim: "Tim, I was shaving this morning, and as I looked in the mirror, the Holy Spirit came to me and said, 'Elmer, today you should buy 50 March wheat market at the open.'"
The way Tim tells it, he didn't hesitate, cross-examine, or stop to pass Go; he immediately asked Elmer, "Elmer, did he tell you where to place your stop?"