Trading is undoubtedly a risky terrain. To trade commodities online, irrespective of its kind, you need to have a solid trading plan and a strategy at hand.
This article enlists some handy tips to help you excel in commodity trading.
This is the first and foremost rule of commodity trading. Once you abide by this rule, your success can increase by multiple folds over the course of time. However, if you do not follow it, quick losses are inevitable. The rule is never to overtrade as this can be the simplest route to losing all your capital in just a blink of an eye.
Overtrading is risking big amount on a given trade. Always try to keep your losses to 2% of the total account value. This way, even if you go through a loss, you will still be able to be in the game.
As the saying states, the trend is indeed your friend. Therefore, it’s advisable always to prefer trade with short term trends. The trend is a commodity hitting a 20-day low or high. This way, if the market is in consolidation, try to keep a distance from it and look for something else. Go in a direction keeping in mind the first rule of 2% maximum loss.
Go with the path that is least resistant. Subsequently, it will bring you the greatest possibilities for success.
It is very common to get carried away easily in emotions while trading online and even more so when you are a beginner. It is highly essential to stay grounded and detached from the position. More often than not, traders get engaged in emotional actions like chasing your losses after an unsuccessful trade or doubling down after a winning streak.
Just like a business, your success and failures here should be defined by good decision-making and solid planning. Your actions should be a reflection of your assessment instead of mere emotions.
Though extreme volatility creates great trading opportunities, it is still advisable to keep a safe distance from it. Especially because it brings an increased risk since the market can move past you quickly. If you are a beginner, it is essential to first understand the risks of market volatility and the price movements of the market.
Since trading commodities can be inherently risky, try not to trade around events that can easily and substantially influence the price movements.
Last but not least, always have a game plan. It is the simplest golden rule of trading. The game plan should be sacredly followed even during all times of losses and wins. It is highly suggested not to begin risking bigger amounts just so to catch up and get back your losses.
Sticking to the strategy is the key, which is why if you have an untested plan, paper trade the account until you become comfortable and can see success.
