The best way to learn how to trade in the commodity markets
is to take lessons directly from a successful trader. However, even if you
found the right persons, and they taught you all they know, this in itself does
not guarantee that you will make money the way they do. For this, you need to
keep a good trading strategy yourself, if you are to succeed in doing commodity
futures trading.
Trade Correctly Or
Not At All
A lot of people don't realize it, but they end up learning
through trial and error. However, you are unlikely to become a good trader if
you use this method. The first thing you need to do to trade the right way is
to read as much as possible about commodity trading. This may not give you the
best trading plan, but it will definitely prepare you for the trades you might
want to take in the future. You will gain more knowledge about the risks you
are about to take, and how to limit them. You will also have the benefit of
learning from the mistakes made by these experts, rather than having to go
through them yourself.
Essentials Of A Sound
Trading Strategy
The first decision you need to take while formulating a
trading strategy is to decide how much capital you want to invest, as this will
greatly determine how much you will end up making as profit. The more you
invest, the better your chances of making money. It provides for more lasting
power in the market if you have more 'risk capital'. Risk Capital is the amount
of money you are willing to lose without it affecting your way of life. The
next step is to decide what your average trade investment will be - as in the
value of each trade taken.
The four essentials of any good trading strategy are as
follows. Firstly, always remember to trade in the direction of the market
trend. Remember, the market trend is your only friend. Secondly, always keep
stops in place. They will determine how much capital you will lose. Thirdly,
let your profits run as deep as you can. Don't be in a hurry to exit a trade if
you are making only a little money. This sounds like it is easy to do, but is
perhaps the most difficult of all the four principals. Lastly, manage your risk
wisely and carefully. Make sure that the risk reward ratio is always leaning in
your favor when you are taking a trade.
Use Of Technical
Analysis
Most traders use technical analysis as part of their trading
strategy. Technical analysis provides many vital tools that allow you to be
more informed about the trades you are taking, and help to decide which ones to
ignore. Among other things, indicators used in technical analysis allow you to
determine trends, entry points, stops, target prices, supports, resistances,
possible breakouts and breakdowns. It would be wise to use these indicators
when you are formulating a strategy to trade in the commodity markets.
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