It’s pretty difficult to survive for long in the commodity market. The price fluctuations are completely unpredictable; and it is also very difficult to identify any trend which could be said to possess a statistical edge in the market when compared to the numerous other trends. However, don’t lose hope or get discouraged as of yet; because there are still a large variety of ways in which one can find their way around the pitfalls and master the art of trading.
The very first thing that a lot of traders do is to head for the libraries and read up voraciously on everything related to trading commodity futures. That’s a commendable thing to do by all measures; however, there’s a bit of problem with that. The theories that are generally mentioned in books and internet blogs/e-books are of quite little use in the practical world out there. A lot of famous and well-respected authors of such books are known to put forward theories and practices which might result in losses for the trader (when he/she puts the theory to test in the market). Therefore, a lot of those theories may look good, but are actually quite impracticable when it comes to dealing with the real market.
A few people would seek out experienced traders and hire their advice, maybe in exchange for a fee. But like expert tips, this method is not very likely to work out either. This is because, the trader who’s looking for advice, would be a completely different person from the advisor that they would seek out to guide them in the subject of trading. May be the beginner does not have an equal amount of capital to invest and is completely inexperienced. And last but not the least; their thinking pattern may not be identical to that of the veteran trader’s. In the light of all these, the question which inevitably comes to mind is: Is there at all a ‘way’ to get successful in the field of commodity trading? There’s no certain answer to that. While it is definitely possible to list out a number of generic advice points and cautionary notes which generally prove to be beneficial for traders the majority of the time, there is no absolute rule-book for success. But let’s hear those advices anyway:
• One should resist the temptation to over-trade. Putting a large sum of money on any single trade would mean kick-starting a cycle of losses. This is especially true if the commodity being traded is very expensive; such as platinum, crude oil or precious stones. In case the person happens to suffer a loss, the hurt will be multiplied manifold if the invested amount was a big one. And the spreads should be kept as short as possible.
• In order to be safe, traders should trade within short spreads till the time they’ve gained enough experience to be able to differentiate between genuine and false upside breaks.
• A lot of times it’s seen that most traders do not invest enough time and hard work when it comes to trading. Instead, they use it as a hobby which can provide profitable returns from time to time.