Commodity Trading the Right Way

It's extremely important to get your commodity trading account funded the right way.

In fact it's the single most important thing you can do before, during and after preparing an effective commodity trading plan.

Getting your account funded the right way is a major step in pursuit of consistent commodity trading success.

When deciding how much money to allocate to your commodity trading account you need to consider 2 things.

First of all, never trade with money you can't afford to lose. But deciding how much you can afford to lose is the tricky part. Most people consult with their accountant, financial planner, or spouse or maybe even just decide for them selves based upon some percentage of their total net worth.

If you ask your accountant or financial planner he or she will tell you based on your total financial picture.

Your spouse will most likely take a more conservative view.

Let's say your total net worth excluding your home is $250,000 and you have $100,000 in stocks and you want to know how much you should start your commodity trading with.

So you look at everything and you come up with a number from your analytical side. Your account says you could allocate $25,000, your wife says $20,000 and you say $30,000. Pick whatever number you like it's just a number from your analytical side. Then before you go to sleep, just as your laying in bed ask yourself how you'd feel if you lost that amount. Your emotional side will come up with an entirely different number. This is the only time in your commodity trading life that you allow yourself to be guided by emotions.

Why is this so important?

Because unless your are emotionally comfortable with the money you start with you'll have an extremely difficult time trading successfully.

If you have any fear of loss it's almost a guarantee that you'll lose. It's easy for me to say that you have to take all the emotion out of your commodity trading but it's impossible if your commodity trading is with money that you are emotionally attached to. I'm not getting new age on you here, I'm just saying that getting started right includes the process of funding your account.

Pretend for a minute that you won a very unique contest. You won $50,000 from a brokerage firm. The catch was that you had to keep the $50,000 in your account there but you could take out any and all profits you made on that money as often as you liked.

Would your attitude toward your commodity trading be any different than it is now with your own money?

This point of starting with the right amount of money was apparent when I was listening to the owner of a brokerage firm that specializes in electronic day trading discuss the losses a trader had racked up that week. I asked this guy about the trader's situation (he looked bad).

The guy said that this trader had quit his job, then took out a second mortgage on his home to take a week long class then trade. The guy was so attached to the money that he couldn't afford to take even the smallest loss and he didn't.

He would hold on to losing trades until they were nightmare positions and...... you know the rest of the story. The first step in the right direction is funding your commodity trading account with stress free money that you are not emotionally attached to.

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