Commodities are trading since the beginning of human civilization but due to many reasons, it had been diminished through time. But, commodity trading has once again become one of the foundations of the global trading system. Nowadays, traders are trading commodities and making profits out of it. However, the traders are not as successful as they are in equity trading. It is because still, commodity trading hasn’t got full exposure. Plus, they are not fully aware of the factors affecting the commodity prices in the commodity market. Demand & Supply, Weather, and currency rate are some common factors that affect commodity prices. Most traders know about this, but to succeed in trading in thecommodity market, traders must have to pay attention to unique factors in respect of the commodities they’re trading in. Each of the commodities has unique factors that drive its price. Apart from this, there are other things that commodity traders must keep an eye on. In this guide, we will give some useful tips for successful trading in the commodity market. These tips will not guarantee you the profits trade-but if you follow all these you can minimize your losses. 8 Useful Tips for Successful Trading in the Commodity Market Here we’re sharing these tips that can help you in trading in the commodity market which is as follows: 1. Do not overtrade: One thing you have to accept it, you will have losses in doing futures trading that is certain, so when you have a bad day, do not forcibly try to overtrade to turn your losses into profits. Everybody has a bad day! But, you do not have to risk too much on a single trade. For example, if you are holding around Rs. 1 lac in your account then do not try to put all your money in a single trade. At least, you should limit your losses to 2-3% of your account money. Even if you have some wrong trades, you will still have enough to trade another day. In commodity futures, it is important to manage losses and plan your trades. 2. Follow the trend:In futures trading, the best way to avoid losses to follow the trend. In this case, the trend is your friend. Try to trade in either uptrend or downtrend but stay away from consolidation. If the market is in consolidation, you may end up placing a wrong trade order and end up in losing money in a range-bound market. If for a particular commodity, the market is in consolidation, then find some other commodity that is trending up or down. 3. Always stick to the plan:The rule is simple, if you’re having a bad day, do not make it any worse. Always stick to the plan even during the times of losses. Eventually, you will find yourself in a situation where your strategy will be failing and you will be incurring losses, but even in such times, use the disciplinary approach and don’t rush to catch up and get your losses back. You’ll be making it worse. If you do not have such a habit then it would be better to start paper trade until you get used to the volatility and the losses. 4. Trailing stop-loss:When your trade is heading in the expected direction, be patient! To ensure your gains, trail stop-loss levels instead of pre-maturely booking profits. It has often seen that many traders book profits pre-maturely and keep entering the same trade at different levels which sometimes erode their profits and build losses. So, if you believe that the market would continue moving up or down, trail your stop-loss levels and book profits. What matters is how much you make when you’re right and how much you lose when you’re wrong. 5. Timing matters:Most traders fail to make profits in commodity trading because they do not time the market properly. Also, many traders and speculators hesitate to limit their losses instead put a limit on their profits. It is human nature that every individual try to prove himself. As a result, an individual will bear small losses in believing that the market will bounce back and prove him correct. But, after a while, he gives up hoping on profits and hope for small losses. It is not because your research was incorrect; it simply means your timing wasn’t correct. It is important when to enter and exit the market. When you enter the market, you must prepare for worse and use a limit on your losses so if market swings, you’ll not end up losing your money and immediately leave the trade the moment it touched the stop-loss. 6. Follow experts’ advice only:When trading in the commodity market, it is important that you take the recommendations by commodity professionals only not some random guy who has a habit of saying, “I told you.” These guys are people who hardly trade with their own funds and have only tidbits of information which they acquired from somewhere. A wise man always says,“Half knowledge is always dangerous.”Instead, follow the recommendations given by commodity experts who are market professionals with years of experience in trading. The recommendations given by these commodity experts are based on technical viewpoint. 7. Don’t bias yourself to a single commodity:Do not bias yourself to a single commodity for trading instead, seek opportunities of making profits whichever commodity you seem profitable to trade-in. Unlike the equity market, the commodity market has a different way of working. However, if you hold no knowledge of trading in other commodities whatsoever, then you shouldn’t trade in another commodity. 8. Avoid leverage as much as possible:Trading commodities required high initial margin compared to trading equities. Therefore, many traders take leverage to trade in commodities, which is quite risky for beginner and professional experts and can wipe out the entire capital within a day or hour even with a stop-loss. So, try to take as less leverage as possible otherwise, any incorrect trade and you could lose your entire capital or more within an hour or day. Note:The information available here is to guide traders about commodity trading. Any of this information is not to encourage any individual to trade. We strongly advise trading under the assistance of expert professional commodity advisor or broker.
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