April 25, 2013

Top 5 tips for commodity trading online

Commodity trading is entirely different from trading in other securities. Goods of a high value, which are important for a large group of people, are called commodities. Items like wheat, corn, oil etc are classified as commodities. A large number of manufacturers produce such commodities consistently, which have a wide range of usage, and fulfill the needs of an entire population. Here are some tips to help you buy and sell commodities online:

Start from a single step: Though you may be tempted to trade in multiple commodities, it’s advisable to start small and choose one commodity. For effective online trading, you should check out its history, assess where it’s likely to head in the future, know how volatile it is, check the level of gaping that can occur etc, and then start trading it. Remember that though it’s easy to open positions in several things, it’s always better to begin small, understand how the market and the commodities work, and then scale up.

Be quick to note trading up of prices: You should buy when you notice a trading up in the trend. You can enter into the buy signals that are in excess of the present prices, in order to beat the anticipative resistance. In case you notice a trading down, it would be wise to consider selling, and search for similar opportunities. To overcome the anticipative support, you should enter the sell signals that are lower than the existing prices.

Trade within your trading resources: Since commodities are extremely volatile, it’s important to decide the level of maximum acceptable loss in a given trading cycle and never allow your open position exposure to come near that level. It’s also a prudent move to trade well within your trading resources, especially at the beginning of a new cycle. In case you begin with a bang, that’s good. If not, it pays to have plenty of margin in hand, which in turn would help you to average down a trailing position and take advantage from a swing back in your favor.

Set specific profit targets for a cycle: For each cycle of commodity trading online, you should have a specific profit target in mind. Many traders might get carried away when they double or triple their money, and load up a large bet only to face a sudden market turn and land where they started from. To steer clear of such situations, you should close your positions once you have achieved your target. Juts take a breather, and think about what you would like to do in your subsequent online trading periods.

Keep the bigger picture in mind and don’t over-trade: The basic rule of online trading in commodities is not to over-trade. Though it’s common for markets to experience ups or downs, it’s important that you use the favorable movements to capitalize on the opportunities, and sell or buy accordingly. It’s also advisable to have the bigger picture in mind and think long-term. You stand a better chance of winning if you take a monthly/quarterly/weekly view, as it’s a tough task to beat the market in the short-term.

Like online stock trading, trading in commodities isn’t an easy job. But you can use these tips as mentioned above to enhance your chances of winning.

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