Commodity trading can generate significant wealth but requires discipline. Unlike stocks, commodities generally increase in value over time due to factors like population growth. However, commodity prices are also influenced by geopolitics, disasters, and supply and demand imbalance. While large gains are possible, commodity trading also carries risk of sizable losses without the right approach. The document provides guidelines for disciplined commodity trading, such as following trends, setting stop losses, and avoiding overconfidence, impatience or borrowing to trade.
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1. Commodity Trading Suggestions, Golden Trading Strategies and Guidelines of
Do's and Don'ts in Commodity Markets
Historically, commodity trading has delivered the greatest fortunes worldwide. It originated centuries
ago, even before the stock markets came into existence, albeit traded then within a distinctive manner,
than as noticed now on electronic exchanges. I have generally quoted that " If trading inside 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 within 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.
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2. 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 inside the Commodity
Exchanges & also to sustain the "Mark to Market" volatility within 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 noticed habits & maybe unknowingly committed mistakes,
which I've 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
within a trade which is leading you further within 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.
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3. 8] Be honest to yourself as hoping or praying for something distinctive, 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, within the worst case.
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![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 inside the Commodity
Exchanges & also to sustain the "Mark to Market" volatility within 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 noticed habits & maybe unknowingly committed mistakes,
which I've 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
within a trade which is leading you further within 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.
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