Trading commodities online is not easy?.don抰 let anyone tell you otherwise. It抯 easy to lose money and much harder to make it. However there are a number of things you can do to give yourself a greater chance of winning. Here are WorldSpreads Ireland抯 top tips:
1. Pick one Commodity
It抯 easy to open positions in lots of things. Look at that glittering gold; anyone for porkbellies; surely there抯 value in corn; oil抯 going up; copper抯 going down.
We say start simple. Pick one commodity. Look at its history. Form your view on where it抯 heading and start trading it. Get to know its quirks. How volatile is it? What level of gapping can occur?
2. Volatility
Commodities are highly volatile. Because of this, managing your downside is actually your primary task. WorldSpreads has seen many a punter who puts on too high a bet?.suddenly the market goes the wrong way and it抯 wipeout. So, define what your maximum acceptable loss is within your given trading cycle and never let your open position exposure approach that level.
3. When Trading Online, Play within yourself
Financial spread betting is a leveraged way of trading the markets. Always trade well within your trading resources particularly at the beginning of a new cycle. If you get off to a great start?that抯 fine. But if your opening trades go against you, it pays to have plenty of margin in hand so that you can average down a losing position and benefit from a swing back in your favour.
4. Gradual build-up
You want to target a profit of �10,000 on trading oil and oil is at $75 a barrel. You think it抯 going to fall back to $65 in coming weeks or months. You could put on �10 shorting at $75 and when it hits $65 you抮e 10k up. Don抰.
If it goes against you initially you could be down a few grand in no time. Better to put �1 or �2 on at first and see how it goes. If it抯 going with you, you can load up some more trades and you抮e building your profit. If it goes against you initially (and you抮e still confident!) you can short another �1 or two at a higher price e.g. $77 or $78.
5. Targets
Set a specific profit target for your cycle. Don抰 be vague. WorldSpreads has often seen traders double or treble their money and then get carried away. A trader can fall into the trap of thinking it抯 an easy game, loading up a large bet and suddenly the market turns and they抮e back where they started. If you hit your target, close your positions, take a break and ponder what you want to do in your next online trading period.
6. Side of the mountain
If you抮e a newer trader, it抯 probably better for you to take decent profits as you head for your final goal. Trading commodities like oil can fluctuate wildly. It抯 like climbing a mountain?.you establish camps / benchmarks all the way up to the top. You don抰 want to fall down 1,000 feet crevices too often. It takes the stuffing out of you. Better to bank profits as you climb upwards.
7. Don抰 overtrade
Newer online traders can spend all day looking at their positions, tweaking orders and fretting about ups and downs. Don抰. Markets go up and down?surprise, surprise. Set out your stall, use buy or sell orders to capitalize on favourable movements and let your view take its course.
8. Longer view
It抯 very hard to beat the market in the short-term. The market and the professionals who trade it are always 20 steps ahead of you. You may think news is news. By the time you see it, it抯 probably old news. If you take a weekly / monthly / quarterly view, you have a much better chance of winning.
9. Right or wrong
You抮e either going to be right or wrong on the direction of trading a commodity. If the pipeline for worldwide construction is dismal, the price of copper (plumbing, roofing, etc.) should decline. But does it? Maybe the Chinese are stockpiling. Maybe the Chileans have decided to expropriate all copper mines in their territory. Maybe the US President has just announced a $4 Trillion infrastructure programme. Always admit to the possibility that your view is wrong and cut your loss accordingly if necessary.
10. If greed or fear enters your thinking, do nothing and go back to your first principles for guidance.
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