Trading in commodities requires you to regularly track quotes, frequently place orders unlike the usual buy-hold strategy used in stocks, mutual funds. Here managing your commodity trading assumes a lot of importance.
Track Your Portfolio – Commodity trading usually involves you taking multiple positions; her it is imperative to keep track of your portfolio. If you have invested in multiple commodities, regularly monitor price variations, your profit levels or loss and go for suitable orders. It is advisable not to start off with a huge margin amount and a gradual build up is often seen as safe approach for small and new traders.
Trade with the Trend- Following the trend of the market not only enables you to get acquainted with the futures trading process without much risk but also enables you to make profits. Various news reports, charts, tools provided by futures brokers etc are extremely beneficial in determining the trend of market. In an uptrend market, buy breakout, buy pullback strategies are beneficial.
Monitor Portfolio Returns- Maintain record of your orders, trades, winners, losers, profit made or loss incurred. Regular assessment of your actions and their yield in the form of profits or losses should allow gauging your trading abilities, return on your investment, breakeven point etc.
Ensure Liquidity – Although presence of a liquid market to offset futures contract is mostly certain, it can not be guaranteed. Here, before entering into any commodity futures contract ensuring that it is actively traded and offer liquidity to you. Newspaper reports, futures brokers can provide this critical information.
Time Your Contract- Timing your entry or exit from the futures contract plays a very critical role. Price fluctuations are imminent in futures market on a day-day basis and entry, exit decisions at the right price hold the key to maximize profits or minimize losses.
Trading strategies- Frame suitable trading strategies as per your targets. Use of valuable tools like stop orders, spreads etc. helps you to secure your money allowing you to survive in the futures market for a long time.
Begin your commodity trading with a sound trading plan and by sticking to it with proper management helps you to last in the complex futures market.