Trading Commodities and Financial Futures
Practitioner primer on futures mechanics and hedging.
Summary
George Kleinman has traded futures for decades and wrote this as a practical guide covering the mechanics of futures markets and the methods traders use.
The introductory material covers what a futures contract is, the exchange and clearing structure, margin and its mechanics, the role of hedgers and speculators, and the specific contract specifications across grains, livestock, softs, metals, energy and financial futures. He explains delivery, basis, spreads and the relationship between cash and futures prices.
The method material covers both fundamental and technical approaches. On fundamentals he covers the supply and demand analysis appropriate to each commodity group and the government reports that move markets. On technicals he covers chart patterns, moving averages, oscillators and the specific setups he uses. He also covers money management, which he treats as the part that determines survival: position sizing relative to account equity, stop placement, and the discipline of cutting losses. He includes his own trading rules and discusses the psychological aspects. The book is practical rather than analytical and does not test its methods systematically. Its value is the clear explanation of the mechanics and the honest treatment of risk of ruin, which most trading books avoid.
Key takeaways 7
- Futures positions are marked to market daily and margined, so a position can be closed out by margin calls before the view proves correct.
- Position sizing relative to account equity determines survival more than the accuracy of any individual view.
- Basis, meaning the difference between cash and futures prices, determines whether a hedge actually works.
- Spread positions between related contracts carry less risk than outright positions and correspondingly less return.
- Government supply and demand reports move commodity markets and are revised substantially afterward.
- Kleinman treats cutting losses as the single discipline that separates traders who survive from those who do not.
- The book explains mechanics clearly and does not test its trading methods systematically.
Who should read it
Individual traders entering futures markets who need the mechanics explained clearly alongside a practitioner's treatment of position sizing and risk.
Where it sits in the reference 2
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