Things you need to know before Buying & Selling in Commodity Market
Trading in US Commodities is not that much simple at all, it does not matter with which kind of financial market you are dealing with, proper understanding and a good use of top trading rules adoption would be crucial to gain consistent amount of money from the market, in short 70% success does come up from the psychology control 20% depend upon on our risk management, rest 10% does depend upon a trading strategy. There is a misconception in trader’s that a trading success does depend 80 to 90% upon the use of a good trading strategy which is not a true thing actually.
If you are a very new trader to this market then I would like to tell you that make your psychology strong at first, this first priority should be to always to adopt a strong mental. Because no trading strategy, no management, no plan will properly if you don’t have a good use of your trading psychology. Hence most of trader’s struggle to earn consistent amount of profit from the commodity market.
You have to make sure that in starting you have to build your trading experience (knowledge, skill, understanding of the market players) etc. There is no short cut method to become a successful trader in any financial market. Everyone have to pass out the so many stages before getting the level of mastery in trading.
Furthermore there is no doubt in it that demo trading would be a great option to start as a new trader, for sure trader’s should go with that but should not spend a very long time in demo trading account because it does not contain the term “Emotion”, controlling our emotion is one of the hardest part of our trading life and that’s only possible through the use of a real trading account, we are not forcing you to go and load the big amount of money in your account, start with small deposit and test your trading abilities
Things you need to know before a Buy & Sell in commodity market:
1.Trading Strategy: A well qualified trading strategy would be very important to build your trading experience smartly here. According to our experience a trading strategy is not only limited to buy and sell, it should be supported very well with a top quality of market understanding. Knowledge and experience about big players chart patterns would be crucial to make an effective use of our trading strategy. Big players are those commercial trader’s who buy & Sell in a big way, they are as follows: big banks, big companies, hedge funds, etc.
2.Entry and Exit Point: You should have a clear understanding and this is one of the main rule of an trading strategy that when we have to enter and when we have to exit from the market. For that you have to spend enough time with your trading strategy in your trading account a long term practice and experience is required for it. Along with it during the trading its not easy to fix out the exit point so better to it before during making an trading plan.
3.Risk management & Money Management: As we had discussed earlier that 20% of our trading success does depend upon our risk management and money management policy, there are a lot of trader’s who has a good trading strategy but due to wrong management they mostly face the margin call and stop out in their trading. Keep in mind that a trading success is all about the combination, no single trading rule would make you a profitable trader here. Hence divide your trades in so many transactions and use proper lot size according to your risk which should be 2 to 3% max each time of your account.
4. Trading Psychology: During a loss we don’t has any idea mostly that what’s going on in the market, trading is all about the mental control because so many time we lose money in financial market due to a poor trading psychology and a wrong trading psychology may lead to so many wrong decisions at the end. example high risk trading, that mostly we follow to recover our profit after a loss. In short we have to setup a solid mind and have to keep in mind that trading does contain both profit and loss.
5. Patience: One of the most important rule that you should follow before buying and selling in a commodity market, Keep in mind that a trading opportunity is not available there all the time, there are so many worst conditions those would not give you any single chance to perform well, that’s why its necessary to wait for your money making spot area, know about your trading capabilities, understanding your niche, and wait for the right timing.
6. Plan B: This is common that market does perform in three types of market scenario like uptrend, downtrend and sideways market. For example we were expecting a downfall in gold but very soon we see that market does changed the trend totally, and this is a time when we need or required a plan b there, this kind of approach bring flexibility in trading and bring consistent gains too.
7.Buy Low- Sell High: Make sure that you are not buying at top, breakout trading can be done on top levels but at first you have to start with selling at top, According to the market cycle most of trader’s more than 95% buy at top and Sell at bottom areas, which does become the main problem for them in commodity market. This is how market pattern’s does play with retail trader’s most of time. So selling on high peaks and buying on low would be a great option for traders.
8.Long Term Trend: Trading with trend is one of the best style to do trade in any financial market, even in commodity market we can see that kind of scenario so many time’s, especially in gold, silver etc. Following a long term trend analysis would be crucial to understand future movements of the market price. So we would suggest you to go for higher time frames like daily chart, weekly chart and check what kind of market structure is being ready there. Keep in mind that all big commercial trader’s does do trade in long term time frames as well.