How Easy Is It To Trade Profitably In Commodity Futures Market?

Trading in commodity futures market can be quite easy if only you follow the cardinal rules which have been applied by the successful traders. Almost every trader in futures market loses but the secret in profiting in this market is to manage risks. Many traders are not able to manage risks because they do not have trading plans, and do not manage their equity. They also do not leverage their gains and losses. Moreover, they do not get substantial education on how the market works.

If you want to trade easily and profit in this market, you have to follow the rules and be disciplined in your trades. The following tips can help you trade easily and profitably in the long run in futures commodity markets;

• You need to scale down your losses. Every trader in futures market experiences losing positions. There are many losses you will trade in any given trading period. In fact, you may find that the losing trades are more than the profiting trades. The big question is; how to you leverage the losses and gains?
• In order to manage losses and increase your gains, you have to trade with very minimal amount in relation to your equity. The amount with which you trade with will largely be determined by your account equity. You need to leverage the risks of loss to about 2% of your total equity. This means that in the event you trade in losses as it is likely to happen most of the time, you will only incur small losses
• You need to use stop loss orders properly. This is essential because you do not know when the market movement will turn against your position. At one moment you may be trading in profit and the next moment you are trading in loss. When this happens, you may be saved from suffering huge losses in your account by a stop loss order.
• You also need to maximize your profiting trade. Because you will occasionally get a profiting trade, when it happens, you need to optimize it. This does not means that you have to trade with a big percentage of money. You should always ensure that you do not exceed a risk loss of more than 5% of your account equity. When you are trading in profit, you need to hang on and ensure your position keeps on running until you have gained substantial amount. This is the amount which offsets the numerous small trading losses you have incurred.
• You should avoid exiting profiting market prematurely and should let the profits run but on the other hand, you should not overstay a position. If you have gained the targeted amount, you may decide to exit the market even if the position is trading in profit. This is because, the more you hold on, the more you are likely to lose at the end of the trade.

In essence, you can trade easily in futures commodity market but you have to follow the simple rules. Although these rules may appear straightforward, a large number of traders never follow them. They try to assume that they are smarter and go their own way. The end result is that they loss with margin calls or big losses, which cannot be offset by the big profits they occasionally gain.