The world of commodities can be both a fruitful and frustrating one. As the commodities market can be volatile, successful education and timing is the key to profitability. In order to get the most out of trading commodities, you need to be focused and not let emotion effect the decisions you make. But, that isn’t all, as the following looks at the steps you need to take in order to trade in commodities successfully.
Stay on top of News
If you want to trade in commodities, you need to make reading the news a daily habit, as it is the only way you will be able to get a complete picture of the market. It will allow you to see the form and market position of everything from gold to crude oil, while also seeing the current state of the economy. Make sure you add the likes Bloomberg, Financial Times and Wall Street Journal to your daily reading list and be sure to keep an eye on any and all news coming out of them throughout each day.
It should go without saying, but technical analysis should be your first port of call when you want to trade in commodities. It is a research technique that involves predicting a company’s future direction and price, by looking at its prior price behavioral patterns, which itself is based on volume.
No trader is an island and using tips and tricks when choosing to trade in commodities is always advised. Technical indicators are mathematical formulas that can be applied to the price and volume of any commodity, and allow you to understand where exactly the commodity is trending.
Develop a Methodology
You can’t just trade in commodities haphazardly. In order to find success you need to develop your own system and approach. This system will include everything from how you approach a purchase to risk management. You should tailor a methodology that is suited to your trading personality, money management philosophy and attitude to risk.
Almost every trading broker offers a free time-capped demo account for customers to use. Many won’t think much of such tool, but in all actuality the importance of them can’t be understated. As a novice, you should never be in a hurry to put your money at risk, so be patient and utilise your no-obligation demo account. It provides the platform to do simulated trades and is a key way to perfect a trading strategy using real market data.
Find the Right Broker
It sounds like an easy task on paper, but in reality it is tougher than it sounds. You need to take time when finding the right broker, as every firm tends to offer something different and cater to a different target market. Everything from the trading platform offered to the account deposit required can change from broker to broker. Take your time and speak to brokers directly to see which is the right fit for your current situation and position to trade in commodities. Also, you should never sign up to a broker that you don’t feel comfortable with.