5 Mistakes You Should Avoid When Trading in Commodity Futures Markets

The ability to trade profitably in commodity futures markets is impaired by a number of things and it is important that traders keenly observe the tips and advices, which are provided by those who have successfully traded in this market. Often, people think that they can be smart and spend most of their times studying the market yet the most successful traders spend little time in researching the commodity futures market.

Although it is recommended that you remain updated of the trends, news and what is happening in the market, on the other hand, there are simple things you can avoid, which will enable you trade profitably and get a good share of the market.

Below are five things you must avoid to trade successfully in futures markets; 

1. Avoid trading without a plan. The cornerstone in profiting is devising a plan that will help you know when it is the right time to enter a position and when to close a position. You should also leverage what risks you have to take. You should know where and when you are going to exit the market if you are wrong. In addition, you should have a safety stop or stop order in case the market sharply shifts against your trade in order to avert huge losses. 
2. Moreover, you must avoid trading without a money management strategy. Managing your money in commodity futures trading means managing risks. In this trade, you will experience a cycle of losses and profits. The losses may be more than the profits and therefore you must know when to make stops. If you are trading with a loss, you should exit. If you hold on to a losing position, you will incur more losses if you are wrong. By managing money, it implies controlling your risks by executing stop orders. It also implies balancing your potential losses against your potential gains. The amount you risk in each and every trade should be minimal in order to avoid your account being wiped out by large losses.
3. Avoid letting losses run. Many traders do not want to lose and they never accept losses. This compels them to hold on to losing trades when they could actually exit through a stop loss order. When you realize that you are trading with a loss, you should stop and wait for the market to turn. You have to accept the loss. A successful trader is one who is able to leverage losses by only allowing small losses. If you leverage your losses and ensure that they are small and keep your profit positions running, then you will gain. In addition, with a predetermined exit price for your trade, you are able to get big profits and only realize small losses. This is the characteristic trading pattern of the successful traders. Since losing is part of the trade, the only way to remain on the safe side is to minimize the losses and maximize profits.  
4. Another thing you should avert is stopping prematurely when the market is trading with profit. Due to fear or lack of confidence, you may exit a position, which is trading with profits because you think that the market may change suddenly and lose that large amount you have earned. It is important to monitor the trade and continue running until that time it starts to change its movement. This is where you should close a position, which is trading with profit. If you close a position prematurely and the market continues to rise, you are tempted to enter again. By the time you enter, it has already earned other traders big profits. When it starts to move against your market, then you get losses.  
5.  Avoid overstaying a position. If the market trades in your favor and meets your price target and you find that you do not have a close stop loss order, then you may be overstaying your position. You must take profits at a predetermined level. Although you are recommended to let your profits run, on the other hand, overstaying a position could cause more harm than gain. If the market breaks sharply and moves against your price, then this could deal you a blow. You will watch all that big profit you had made drain away within a short period.

In essence, these are some of the things, which you need to observe in order to be successful in trading profitably commodity futures markets. There are unexpected turns of events, which can strike the market and wreck havoc on prices causing the market crumble down. This is the time when many traders lose all those big profits they have gained in their trade.

With a good plan and risk management, you are able to earn big from this market in the long run. You should avoid margin calls at all costs because these are signs that you are not trading well. Margin calls means that your capital is in danger and could be consumed leaving you with no money to trade in the big profits. Margin calls can be avoided by following the cardinal rules of profitable commodity futures market trading.