Commodity Futures Trading - How To Reduce Risk And Aim For Success
If you are considering going into and trading online commodity futures then do keep in mind that there is a large element of risk involved unless you reduce your risks and exposure with care. A such its sensible only to risk the capital that you can afford to lose and before doing anything take time to learn about futures trading to ensure your exposure is never more than it should be.
One good thing about trading commodities is that there will always be an intrinsic value in the product. So for example the value of a quantity of nymex gas or of crude oil is never going to be nil.
Compare that to traditional stocks and shares and this is not so with them. Stocks and shares can indeed be valued at nil. Look at the number of company bankruptcies in the past' months to understand what I mean.
You need to try as much as possible to detach your emotions from your trading. If you are emotional with your losses or with your gains you are in for a roller coaster of a ride.
Now this is where the problems begin to arise. A commodity trader who is being bullish on gold may think its a good time to buy into 10 gold contracts at a cost of $100,000 to their trading account. So if the price of gold were to move to $1100 an oz. then all is well and the money in the traders account doubles.
If you feel the time is correct to become bullish with gold and go in for 10 contracts at a cost of $100,000 and a value of $1 million and the price of gold were to move upwards to $1100 then all is looking good for us having doubled the value of our investment. But lets say that the value of gold were to dip to $900 an ounce then we are on wipe out unless we are capable of meeting the margin call by the broker to place more funds into our account.
With online trading there is a large advantage over what was previously available because of the speed of update to market fluctions. Login to your trading account at any time of day you like and you are updated to the second, or at least to the minute, regardless of the country your investments are made in.
So the basics to be aware of if you are just setting out with your commodity future trading then take it easy - do not rush to make lots of money as you will most probably end up being over exposed and therefore open to some hefty account losses. Its best to learn with experience, but while you are learning do think about tomorrow and keep enough funds available for times when things take a downturn. - 23305
One good thing about trading commodities is that there will always be an intrinsic value in the product. So for example the value of a quantity of nymex gas or of crude oil is never going to be nil.
Compare that to traditional stocks and shares and this is not so with them. Stocks and shares can indeed be valued at nil. Look at the number of company bankruptcies in the past' months to understand what I mean.
You need to try as much as possible to detach your emotions from your trading. If you are emotional with your losses or with your gains you are in for a roller coaster of a ride.
Now this is where the problems begin to arise. A commodity trader who is being bullish on gold may think its a good time to buy into 10 gold contracts at a cost of $100,000 to their trading account. So if the price of gold were to move to $1100 an oz. then all is well and the money in the traders account doubles.
If you feel the time is correct to become bullish with gold and go in for 10 contracts at a cost of $100,000 and a value of $1 million and the price of gold were to move upwards to $1100 then all is looking good for us having doubled the value of our investment. But lets say that the value of gold were to dip to $900 an ounce then we are on wipe out unless we are capable of meeting the margin call by the broker to place more funds into our account.
With online trading there is a large advantage over what was previously available because of the speed of update to market fluctions. Login to your trading account at any time of day you like and you are updated to the second, or at least to the minute, regardless of the country your investments are made in.
So the basics to be aware of if you are just setting out with your commodity future trading then take it easy - do not rush to make lots of money as you will most probably end up being over exposed and therefore open to some hefty account losses. Its best to learn with experience, but while you are learning do think about tomorrow and keep enough funds available for times when things take a downturn. - 23305
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Want to learn more about natural gas futures? We specialize in natural gas futures.
posted by Mr. Forex at
10:55 AM
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