There are about 5 golden rules for trading commodities the right way. Get ready. It is time to unwrap the candy bar to find the golden tickets.
1) Do not overtrade, ever. This goes for everyone. Overtrading means something different to each person. The point is to find that meaning and stick with it. Say someone invests $100,00o in one day. This person’s loss should not be more than 2% of the initial trade investment. In other words, $2,000 should be the limit for that loss.
2) There is a saying that short-term thinking is a trader’s best friend. This will not work in stock trading. This will work with commodities. Traders need to be thinking short-term for much of their investing. This is the one place will a trend will work.
A trend is when a commodity hits a 20-day high or low. Does the market value look to be heading towards a consolidation? Stay away from it. Pick something that is trending upwards more. Traders need to stay with their 2% maximum loss during this time. It is easier to recoup on a loss that is this low. It is not so easy when it gets higher.
3) Do not add to the losing table Too many investors and traders do this in an abusive way. Adding to a losing table will only suffer more losses to come. Any trader who gets hit with one loss needs to stop. Traders who add to their losses will suffer more than a 2% loss at the end of the day. Think about it.
4) Never answer to a margin call. This gets tempting for some traders to do. This will result in overtrading and be extending the limit. Traders need this margin to pad any possible loss that may result. Traders who mess with this will only suffer more losses later on.
5) Always have a game plan in mind. Some like to chance it by 5-10% when they know they have a loss to recoup. This is not going to work. Some like to test an unproven system. Why would a trader do this? This is only going to add insult to injury.
Players should not chance anything, whether it be for a win or loss. Stick with what is working and take it from there.
Hope these 5 golden tickets have helped. Willy Wonka has left the building. The rest is up to you!