Speculative
Futures Trading can be a highly emotional and stressful
venture. That the majority of small investors in the
futures markets are losers is no surprise. The psychological
battering that comes from Commodity Trading can make
even the most seasoned pro into an emotional basketcase.
In order to be successfully in futures trading and commodity
trading one must certainly obtain the necessary knowledge
of the markets. Information such as fundamental factors
that drive prices and/or technical tools based on price
charts and price patterns are needed to predict price
movement. But even this is not enough.
A trader should have a sound Futures Trading system.
A Commodity Trading system should provide a general
set of rules that the trader can refer and adhere to
when emotional madness might otherwise prevail. As a
trader begins to discover individual weaknesses and
trading flaws, more specific rules can be introduced.
A futures trading plan is a must. This plan might specify
such things as: which markets to follow, number of contracts
to trade at any one time, profit goals per week, month,
or year, and maximum loss allowed per trade. Without
these rules emotions such as greed may take over when,
for instance, a position is profitable. Greed could
turn to despair when prices turn around and the trader
refuses to exit the market, in hopes that prices will
become favorable again. A good commodity trading plan
would have dictated an appropriate exit from the market
to protect profits.
One of the most common mistakes of Futures Trading speculators
is having no limit on losses. In a losing situation
it is easy to let losses accumulate in hopes that prices
will turn around. A losing position should be exited
quickly. A losing position doesn't mean the speculator
is a bad at commodity trading, simply that the timing
was wrong. The trader should re-evaluate the market
to assess the proper timing.
Another common mistake in futures trading is to take
profits too early. There is a tendency for the novice
trader to take profits while the market continues upward
without him. Market movement should determine profits.
A brokered exit order that lags slightly behind current
prices will protect profits and can help improve you
success in commodity trading.
A good trader is a disciplined trader. Having an unemotional
attitude and a deliberate Futures Trading system are
the hallmarks of a successful trader in Commodity Trading.
