The Commodity market is considered a risky zone by many investors and rightly so. While you can see huge profits if you time your trade well, large scale capital involvement creates the chances of incurring heavy loss too. There are several places where you can find people offering commodity market training. That is quite useful thing because the commodity market is something that novices should avoid. However, commodity trading is not as big a no-go zone as some people might think. Tips2Trade present a few do’s and don’ts that will help you earn profit from the live commodity market:
1. Do not Overtrade: Whether it is because of all the hype of the moment or because of the sub-par trading plan, traders at times do overtrade which is one of the major pitfalls of the commodity market. Overtrading not only includes putting in a lot of capital at one place or opening up more than planned number of trades but also holding on to failing investments. Along with capital loss, it also results in over-leveraged accounts and poorly managed money. All these together can lead to you making further rash decisions.
2. Never add to a losing trade: As a trader, it is necessary to understand when your contract is in a losing position and retract as soon as possible. Holding on or adding to a losing trade in the hopes of at least one or two of them working out can wipe your account. There will always be the next chance as long as you are careful enough so that you are not closed off your position. Investing further in a losing cause will just pile up your loses.
3. Never answer a margin call: A margin call is a red alert you need to backtrack. If you have already run out of usable margin then that means anything further in that direction is sending out good money after the bad. For a wise trader, receiving a margin call is a glaring, neon sign that you are on the wrong side of the market and it’s time for re-evaluating your trade.
Have a Stop-Loss limit: This goes without saying. Always have a stop loss set. The commodity market is extremely volatile, affected by multiple geographic and political factors that one person cannot hope to keep up with. Keeping a stop-loss will prevent you from incurring unimaginable losses because of some unforeseen geopolitical or economic or financial turmoil.
Have a game plan: Entering the commodity market with no plan or trading ideas suitable for equity market is a financial suicide in most cases. Study the market trends and keep an entry and exit strategy. Stick to your pre-planned investment blueprint and don’t be attracted to the ‘possibilities’. Always follow the trend and neither panic nor be over-confident in your trades. This will prevent you from both, prematurely exiting a profiting trade as well as holding onto a losing one.
The commodity market is affected by a lot of factors and is a difficult water to wade if you are not well-versed with the volatility of this field of investment. Tips2Trade provides commodity trading classes that will be extremely beneficial in helping you find your footing in the market.