Commodity Trading Tips, Golden Trading Tips and Guidelines of Do's and Don'ts in Commodity Markets

Historically, commodity trading has delivered the biggest fortunes worldwide. It originated centuries ago, even before the stock markets came into existence, albeit traded then in a different manner, than as seen today on electronic exchanges. I have often quoted that " If trading in the speculative markets, then Stocks & Equities is for boys but Commodities & Forex is for men" (No gender bias intended). Wealth creation is not a matter of chance. It is a process that needs sharp analysis & a lot of work time. Plan your play and then play your plan. Happy investing!

The similarity in Stocks & Commodities begins & ends at the point that they are both speculative trade markets, but there are a lot many differences in both these markets. Unlike the stock markets where even a highly valued stock could eventually see all it's commercial-value being eroded due to several reasons, the values of commodities may see corrections on a large supply but eventually will only increase again with time, as the inherent imbalance in the demand and supply ratio would always favor demand more than supply due to many influencing factors like growing populations, rising economies and better lifestyles to name a few. All adverse scenarios like geo-political tensions, wars, climatic imbalances, catastrophes and other man-made disasters, etc. which pull the stock markets down generally push the commodities up (especially Agro-Commodities & safe haven instruments like Gold), basically due to the differentiating factor that these commodities generally are also regular necessities to normal life and not simply investment instruments. Most Commodities are traded globally & the price rigging in these is next to impossible unlike, as seen in a lot of equity instruments where manipulation is a lot easier & occurrences of traders getting duped are rampant.

Massive wealth creation is possible through Commodity Trading & Investments if done the right way & with a lot of strict discipline. But if done the wrong way, which is generally the most followed path, there will be enormous losses also. You can start off equity trading or investment with smaller sums of money, but would require deeper pockets to be able to do some modest trading in the Commodity Exchanges & also to sustain the "Mark to Market" volatility in the Commodity Markets. The gains & losses in both also become proportionately big or small eventually. I would now like to highlight some basic Do's & Don'ts for the most frequently seen habits & maybe unknowingly committed mistakes, which I have noticed in most traders & had to address to a number of times as a Market Analyst & a Commodity Market Trade Advisor.

1] Do not trade with hesitance, half heartedly or in over confidence. You may incur small but repeated losses if you are scared of the markets or heavier ones if you are overtly brave and foolhardy.

2] Be patient when your trade positions are moving in the right expected direction to extract maximum gains and ensure the gains by improvising the stop-loss level, time and again. Do not be pessimistic here or else you may book gains pre-maturely & may later repent on exiting early. This may lead to keeping on re-entering the same trade at further levels & repeatedly exit at small reversals in panic, which in turn would erode earlier small gains & also build losses. It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong & that makes all the difference between Winners & Losers.

3] Do not be over optimistic when trades have hit the suggested stop-loss levels and make sure you exit there. You may miss better and multiple opportunities on being stuck in deals gone wrong leading to higher and higher losses each day.

4] Do not discuss your open positions with one and all. This will lead you nowhere and confuse you more, as all would air their own views on the same (whether knowledgeable or not) and many a times, would make your trade decisions seem as foolishly and hastily taken. If only you would have consulted them earlier...

5] Do not develop a tendency of being a Bull or a Bear in these markets. There is only one side to the markets and that is neither the Bull side nor the Bear side - But ONLY the Right Side at the Right Time. Trend is King, so follow it at all times.

6] Realize that you are in a bad situation and exit fast when you need to pray for relief at each rise or fall in a trade which is leading you further in a deep pit towards heavier losses.

7] Follow ONLY one Analyst's or Technical Advisor's guideline at a time, as more guidelines will again create a lot of confusion. You can opt for or look out for an alternate guidance when the earlier guideline proves to be less productive or loss making, but not simultaneously.

8] Be honest to yourself as hoping or praying for something different, than the actual reality or situation is nothing less than fooling your own self.

9] There is NOTHING such as HUGE, mind-blowing and sky-high profit makings overnight, as assured by many to win a prospective client. YES, there are sizeable gains and high returns for a disciplined trader and may return exactly the opposite, if not worse, for the non-disciplined. Do not enter this trade market under any illusions of getting to be a Billionaire overnight. It will never happen. In fact all that you now possess may also be lost.

10] DO NOT BORROW or trade with funds that are not yours or pump in more funds by borrowing to hold on to loss making trades. Trade only with own funds that are spare-able and be prepared mentally in losing even that in totality, in the worst case.

11] Never trade or enter / exit positions in panic. Volatility is a non-separable component of this trade market and will be present most of the times.

12] Do not be a party to rumors or be guided or misled by these. Verify & double-check on the source for genuineness.

13] Stay away from the people who have a habit of saying "I had told you - See now?". These are the very same people who would never put anything on paper or ever trade on their own views- with their own funds, as in reality they do not have any concrete views or knowledge. They are mere sponges on an ego trip, who keep soaking or gathering tidbits of information from anywhere available irrespective of their reliability, put all together and spread the newly formed news. If what they say goes wrong, they would disappear and would be seen nowhere or if found, might now have some stronger views and reasons for why the wrong happened as generally these kind of people are very good convincers & are blessed with the gift of gab. Listening to these characters and their views is very dangerous. As the wise always said: - "Half knowledge is always the most dangerous", "Ignorance is Bliss" and "Blessed are the fully knowledgeable".

14] DO NOT TRY to be the TREND SETTER or the first one to know where a particular trade will turn from. No one can possibly be, except by a sheer matter of chance, the best seller or the best buyer - so why try it? You might end up losing a lot of money and also becoming the laughing-stock for all. Follow the trend and make respectable gains, "Quietly".

15] Do not enter the Commodity Markets with Stock Market trading ideas. Though both are speculative trade markets, there is a substantial difference in both and generally have opposite trading patterns and thumb rules, as elaborated earlier.

16] Providing past performance records is not a mandatory rule for Analysts or Advisors, and the same info (wherever posted) can be misleading, as the same can be manufactured by the end of day to dupe prospective clients. Do not try to look for something that can misguide you & lead you on the wrong path, ending up in losses - money-wise & also confidence-wise. Upon subscription by the trader, the same people showing fantastic results on their websites, but performing poorly in real-time, may later not be available even for a discussion or may later say that "Past performances are not an assurance of any future success". So take a Trial for a fortnight or a month (not for a day or two), do some live paper trading & only trust the live performances. Judge the genuineness of the research quality and real-time trading support only on the basis of live experience and not by past performance records. Most of these records could be fakes. Better to pay for the Trial & come to the right conclusion, rather than loose a lot of capital by trading on faith generated by looking at & getting impressed by the past performances.

17] "Trading without a Stop-Loss & yet making gains is sheer Talent - Not trying such stunts is Intelligence". The stop-loss practice is for your own benefit as this provision has utmost importance and is not provided on each trading ticket by the exchanges, just for the heck of it. If the trades turn & move in the opposite directions beyond entry levels, they might further move very fast in a volatile manner & the losses accrued, in the absence of a stop-loss, can be un-imaginable. There are several things happening across the globe constantly, which affect the price movement, direction & volumes in commodity trading, as basically they move in accordance with demand and supply situations & are also greatly affected by the Geo-political scenarios all over. It is not humanly possible to track each & every occurrence, watch out for economic data's released all around the globe and understand the level of their impacts on the trade movement & direction of all commodities, though you may be constantly updated on most of the developments, most of the time. Many times the reaction or the impact of these developments is so quick & enormous, that large & rapid movements in rates are instantly triggered with high volatility, even before the news on these developments reach all over the world. In such a scenario, you may never know as to what level these trades could go to & the losses (though sustainable by a few) may be very large. These losses are not the only losses that you incur if caught in such a situation - you also miss out on the opportunity, the same commodity is offering, in the opposite direction and also by other trades as most of your attention and funds will now be concentrated and caught up on this particular trade gone wrong. Remember - Growing wealth is important, but safe guarding seed capital is even more important. It's easier to resist & also absorb losses at the beginning than later.

18] Averaging in loss making positions is a practice which is most commonly seen & generally leads to more dangerous losses. This is also recommended by a number of advisors, but I certainly do not recommend it. In fact I strongly oppose it. Remember - YOU are incurring the loss & not your advisor.

19] Putting all your eggs in one or a couple of baskets could prove to be more dangerous for the day trader. Having a wider investment or a trading spectrum would be more effective. All entered trades may never go wrong simultaneously but a stray one or two could and what, if you have traded in only those? It may also happen that the 1 or 2 trades that you have entered into, have moved in the right direction, but have not achieved the expected high results or gains in comparison to the ones you have left out. So it is only advised and not stressed upon - that the trader should take positions in a wider range of trading / investment opportunities to achieve better results.

20] Do not be biased to a particular commodity. Look at all commodities (having healthy trading volumes) only as profit generating opportunities & not at the English name or Social status of the commodity.

21] Always remember -"You cannot use yesterday's ideas for today's business and expect to be in business tomorrow". Be ready to accept and implement change immediately and constantly as "Change" is the only factor that's constant in the world - everything else keeps changing and its meaning is all the more true in these highly volatile and ever-changing market scenarios.

Adherence to the above is sincerely recommended to trade and achieve gains in these ever volatile Speculative Trade Markets.

Choosing the Wrong Futures Trading Systems Make You Bankrupt?

Future trading systems are surging in popularity as traders want to keep their losses to the minimum and be ensured of profits. There are many future trading systems and while identifying them, you should check out the robustness that makes it truly great.

A system has to be on top of the rest to be able to be of any use in forex trading and both the experienced as well as the newbie wants some great stuff to make profits.

2 opposite positions and immediate order execution

At ifc markets, you get a trading platform that is loaded with a wide range of possibilities and you can transact any arbitrary volume beginning with $100 and get facilities for quick and immediate execution.

You can open two opposite positions and orders are executed automatically. In forex trading, you can get all account types with 2 pips fixed spreads. Wherever you are located in the world, you can get your account opened in ten minutes flat.

With a free margin, get 2 percent interest in ifc markets and withdraw money from the trading platform without many formalities.

But while using futures trading system, you should realize that the particular trade is not meant for everyone. There is a chance of huge loss and it is bound to occur anytime without any prior warning. There is no system in the world that can guarantee continuous profits and no losses.

Should deliver in all conditions

Before buying a system, check whether it is 100 percent mechanical and can be fine tuned to data that comes in regularly. It should also be aimed at liquid markets where there are large volumes traded. And forex currency trading is done in trillions of dollars daily making it far more attractive than commodities or stock markets the world over.

And a good system should deliver in all conditions whether it is an upward or a downward trend, a bull or a bearish market. Commission and slippage assumptions should be factored in any trading system for the futures market. The dollar amount of the drawdown as a percentage of the total account should be considered.

You should identify the risk in terms of finances and emotion when you check out the reviews of future trading systems online before installing them.

Now that you understand how forex trading works, I have a special time limited bonus for you.

What's the Secret Highly Profitable Traders Possess in Futures Trading That You Don't?

Let me first say that if you read all the hype that websites spew on their profits it would lead one to think that futures trading is like owning an ATM machine. You simply need to push a button and money comes shooting out. Futures' trading is not a "get rich" quick proposition; on the contrary, futures' trading is a tough business and it takes time, experience and extraordinary patience to succeed. Having said that, the prepared trader can earn substantial sums with a bit of determination and perseverance; if you approach the business with that attitude you just might succeed.

Before I lead you on about some "secret" I have to admit there are no secrets to successful trading. There are, however, some important traits that all successful traders I have known share. Like many things, the successful trader of today works in much the same way the legendary traders of years past. A successful trader possesses a specific skill set honed by experience and trading wisdom and is a constant student of futures trading. Believe me; you will never know too much to trade successfully.

Consider these traits when considering a career in trading:

1. Determination. You are going to have days when you lose trades; sometimes you are going to have days when you lose more trades than you win. The ability to learn from your losses is paramount to your success. Trading knowledge is learned in small bits from education and reading charts and the more you have of these two commodities the better you will become. If you can't accept losing you will not succeed in this business.

2. Trading Technique. Great traders stick with a specific futures trading methodology and avoid mechanical systems for generating potential trade entries and exits. The market is an ever changing animal and if you are relying on a one-size-fits-all mechanical trading system the market is going to leave you in the dust. Great traders work with real-time indicators, especially short term traders like scalpers. Lagging indicators work fine for swing trading, but are problematic for short term traders.

3. Experience. You are not going to read a couple of books and tear the futures market up, it just doesn't work that way. The old timers told me that you need 10,000 hours of chart time to be worth your salt. I think technology and futures trading education has shortened that time horizon considerably, but experience is valuable and chart time is a must.

Learning to trade is a process and if it suits your personality type the three attributes outlined above will serve you well. Don't lock yourself into a mechanical system, be a trader "for all seasons."

Trading Futures - 3 Most Commonly Asked Questions Answered

A futures contract is a financial contract to buy or sell an underlying instrument at a fixed date in the future, at a specific price. Trading Futures is the buying and selling of futures contracts. Futures contracts can be issued on a variety of financial instruments such as commodities, equities, currencies etc.

In comparison to trading financial instruments directly there are a couple of advantages of trading futures contracts instead.

(1) Leverage: You are able to control larger quantities of the financial instrument with smaller amounts of money. An investor can control the underlying instrument by paying a fraction of the value of the contract (also called margin). In this manner the investor has access to 100 ounces of gold for a couple hundred dollars.

(2) Minimal transaction costs: Due to the liquidity of the futures market, the transaction costs are very competitive hence usually minimal.

(3) 'Shorting' and Tax advantages: Another advantage is that investors can "short" the futures contract or be the seller. This technique can be used to make money if the belief is that the price of the instrument is going down. In addition, there could be tax advantages in comparison with normal investing depending on the taxation laws in place.

Some disadvantages

Leverage is a double-edged sword. In the case where an investor purchases a futures contract by making a payment equivalent to margin and the price of the underlying instrument goes down, then the buyer could lose more than the initial stake in the transaction. That is why its very important to understand why trading futures for this reason is considered risky.

Commodities Trading Software - Use Specialized Software To Practice Commodities Trading

Everybody wants a better life, which is much more probable to achieve when you have more money to work for you. It is true that money cannot buy happiness, but the absence of money isn't a very happy situation either. That is the basic reason why people work or start business.

In any sort of work relationship, it is all about trade. You either trade a service in return for money or you trade a product in return for money when it comes down to the basic level of thought.

But unfortunately, very often the money that you make just doesn't seem enough to make you or the family happy. People often believe they would be much happier if they had more money.

This is the reason why many people begin trading on commodities to make a better living, and the success stories are many in the field. But let us also remember that it is risky business, and many have lost more than they have made in these waters.

It is a big mistake to put in more money in the markets than what you can afford to lose. You never want to lose money of course, but remember - even when you are dead sure of how a stock is about to move, things can always go wrong. Commodities trading is for those who already have a little experience in the stock business. It is not a bad idea at all to use simulation software to get a feel of how the markets work, especially if you are a complete newbie here.

If you are into speculating, you will study the movement of stocks and when you do you will soon be able to predict how a stock will rise or fall in the next few months. When you are sure of a stock going higher, you will want to buy now and sell later when it is at a high rate. That's what commodity future trading is all about.

When you use software to simulate the changes in stock you will get a good feel of the surprises that the stock markets can throw at you.

But do remember that the real world is unpredictable at times. For instance if your studies show that the price of a stock of a certain crop is on its way up, natural disasters can cause a failure of the crop, which in turn would knock it out of the stock markets as well.

Whether you are into the stock business to make an extra income, or if you want to get into futures commodity trading full time, be sure you get a feel by using a simulation software before you make the decision.

Even the Best Forex Trading System Requires Basic Futures Trading Knowledge

There are many Forex trading systems out there. Many of them claim they are entirely mechanical and therefore require no Forex trading knowledge on the part of the trader. The advocates of these types of trading systems tell us we can all be successful and make a lot of money even if we are complete commodities trading idiots. Is it a fact we can make a huge amount of money in the Forex market without knowing anything about it. In this article, we discuss things you should learn before trying to tackle the Forex.

It is true mechanical systems that simply supply computer generated buy and sell signals make it unnecessary for traders to be experts in trading currencies or other commodities. However, having no knowledge leaves the trader vulnerable. You are not in a good position when anybody can easily pull the wool over your eyes. Here is a little background information that will give you some solid footing in the basics of Forex trading.

Basic knowledge every program trader should have an awareness of are these two things:

· Trading spreads
· Going short

Trading Spreads

All Forex contracts that are traded are spreads. Trading a spread entails buying one thing while at the same time selling, or going short, on another. In the commodities futures market, all contracts have expiring months. So, a common trade which utilizes this fact is buying a near term contract and selling a contract that will not expire for several months.

For instance, buying August Live Hogs and selling next February Live Hogs. The hope here is the August Live Hogs' price will rise more than February's and if so, a profit will be made. Whether both contracts rise or fall in price is immaterial as long as the August Live Hogs' rises more, or falls less in price than the February contract.

Contract months are immaterial in Forex or any type of currency trading. Forex spreads consist of two currencies being traded at the same time. Buying a EUR/GBP spread means you are buying a Euro contract and at the time selling British Pound contract. If both the Euro and the Pound rise in price but the Euro rises more you will be in profit. If they both fall in price you will still be in profit as long as the Euro falls less.

Going Short

One of the most difficult concepts to grasp in future trading is "going short." Going short simply means selling something you don't own. How can you do this? By promising you will buy it at a later date. It is an easy concept to grasp when you think of buying something and selling it later. This is done all the time.

With a short position, you essentially do the same thing; you buy something and sell it. The only difference is the timeline. With a long position, you buy the commodity and sell it later; with a short position, you buy it later and sell it first. When you short a commodity you are hoping it will fall in price because, if it does, you can buy it back at a lower price than you first sold it for.

Going short on a EUR/GBP spread means you want the Euro to go down in price in relationship to the British Pound. If they both go up in price or if they both go down in price it doesn't matter, the only important thing is that the Euro falls in relationship to the Pound.

Beyond understanding what having a short position is and what spreads are, we should also understand the different types of orders we place to open and close trades. These order types include:

· Market orders
· Stop orders
· Limit orders
· Market if Touched (MIT) orders

This article contains some very basic knowledge and yes, you don't need very much to let a computer program tell you what contracts to trade and when. Still, having no knowledge is not all it's cracked up to be!