Commodity Futures Trading - How To Reduce Risk And Aim For Success
If you are reasonably new to commodity future trading then do keep in mind that there a number of things that can go terribly wrong - there is a large risk factor here. With this in mind its wise to risk only the capital you can afford to lose and nothing more. Do not borrow as I have done myself. Too much risk to take - believe me!
One good thing about trading commodities is that there will always be an intrinsic value in the product. So for example the value of a quantity of nymex gas or of crude oil is never going to be nil.
Commodity trading though is still risky. Ideally you should reduce your risk and exposure and therefore the main thing is to only limit your investment to the amount of money you could afford to lose.
You need to try as much as possible to detach your emotions from your trading. If you are emotional with your losses or with your gains you are in for a roller coaster of a ride.
Now this is where the problems begin to arise. A commodity trader who is being bullish on gold may think its a good time to buy into 10 gold contracts at a cost of $100,000 to their trading account. So if the price of gold were to move to $1100 an oz. then all is well and the money in the traders account doubles.
If things do go well then great, life is good and all is well, but chances are that if you continue to trade in this way - which is to some extent a gamble - you will lose out in the mid to long term.
With this sort of exposure in the market we could end up with serious losses. Its all very well to see things very positively and continue to believe in profit after profit. But at the same time we need to be realistic and know that there will be times when we hit a few losses. As such we need to have the funds available to deal with the losses.
When trading in online commodity futures there are many advantages over the traditional method due to the ability of up to date information of the market. But this leads perhaps to an inexperienced trader being given a false sense of security leading to over exposure of available funds. Keep things in moderation and the chances are good that slowly and surely your trading account will flow with profits. - 23200
One good thing about trading commodities is that there will always be an intrinsic value in the product. So for example the value of a quantity of nymex gas or of crude oil is never going to be nil.
Commodity trading though is still risky. Ideally you should reduce your risk and exposure and therefore the main thing is to only limit your investment to the amount of money you could afford to lose.
You need to try as much as possible to detach your emotions from your trading. If you are emotional with your losses or with your gains you are in for a roller coaster of a ride.
Now this is where the problems begin to arise. A commodity trader who is being bullish on gold may think its a good time to buy into 10 gold contracts at a cost of $100,000 to their trading account. So if the price of gold were to move to $1100 an oz. then all is well and the money in the traders account doubles.
If things do go well then great, life is good and all is well, but chances are that if you continue to trade in this way - which is to some extent a gamble - you will lose out in the mid to long term.
With this sort of exposure in the market we could end up with serious losses. Its all very well to see things very positively and continue to believe in profit after profit. But at the same time we need to be realistic and know that there will be times when we hit a few losses. As such we need to have the funds available to deal with the losses.
When trading in online commodity futures there are many advantages over the traditional method due to the ability of up to date information of the market. But this leads perhaps to an inexperienced trader being given a false sense of security leading to over exposure of available funds. Keep things in moderation and the chances are good that slowly and surely your trading account will flow with profits. - 23200
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Want to learn more about commodity future trading? We specialize in natural gas futures.
posted by X - Men @ 2:52 AM
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