Gaining market knowledge
is the first crucial element in trading any market. Do not overlook
the value of doing your own work and your own analysis. In addition
a capable adviser will also be a great asset to your trading effort.
A capable adviser is one who will educate and assist you when
you're new to commodities. These's a lot to know and in the early
stages you'll find that the appropriate adviser for you will make
you feel comfortable in building your knowledge base quickly.
There are many good brokers and if you realise just how important
your broker can be then you will increase your chances of success
and also hopefully enjoy trading.
By the way, a good broker does not necessarily mean that they
have to have been in the market for more than 10 years - it's
more about providing TOP QUALITY SERVICE. Don't look
for an advisor to 'tip' you off on 9 out of 10 winning trades.
What you are really looking for as a client is a differentiated
level of service and your broker should have a well known reputation
for accuracy, top quality execution, succinct technical and fundamental
research in addition to regular trading seminars for existing
and prospective clients.
More than likely the person you'll speak to most will be your
adviser during the day. Markets and strategies can be discussed
with your adviser, however, as a trader, you're better off combining
this with your own analysis rather than asking for specific comments
on future market direction.
Having done your analysis, decide on your level of entry, your
stop loss level and your stop profit level and then maintain complete
discipline throughout. The mistake that most make is becoming
greedy. It's a well worn statement but it's so true in futures
markets, the emotions of FEAR & GREED lose you money
and lose you potential profits.
Translated, fear really means the lack of confidence in sticking
to your analysis with greed pertaining to poor money management.
If your analysis suggests that you should be out either with a
profit or a loss at a designated price then don't start crossing
your fingers and hoping. Close the position and reassess the market
for the next good entry level, or alternatively seek opportunities
in other markets where the picture may be clearer.
The orders for offshore commodities will normally be given to
your adviser when the US markets are closed. Of course, you can
also place orders directly with the night traders. Occasionally
a night trader will have time to comment on the markets although
more often that not when you're flying around in a chair at 2.00am
watching over 100 markets, time is limited so being clear and
concise when placing orders at night is vital.
Be aware of any orders you have placed, that is, that are 'working'
in the market. If you want to change an order or cancel one ensure
that your new order is the only one being 'worked'. It's incredibly
important that you are aware of your position and what's working
at any point in time and that's where your own trading documentation
is particularly important.
This sounds obvious but you'd be surprised at how many traders
neglect to do this. Set up a trading diary or preferable a spreadsheet
that calculates the necessary figures for you. Have columns showing
date, trade entry, number of lots traded, trade exit, profit,
loss, brokerage, etc.
Other columns that I advise my clients to have require you to
write down why you got into the trade, out of the trade, how your
own psychology was at the time of entry and exit and what you
learned from the trade. This detailed analysis serves to reduce
the chance of making the same mistake over and over again - and
if there's 100 different mistakes that will cost you money in
trading, you don't want to constantly make the same ones time
and time again!
Even if you're mostly oriented towards technical analysis in
trading it's still prudent to know when various USDA crop reports
are scheduled to be released. Other elements to be familiar with
are the seasonal tendencies of particular commodities. There is
no guarantee that the seasonal trade will adhere to the historical
trend of success in the current year however these 'windows of
opportunity' are well worth being aware of.
Also watch the whether which can paly havoc with commodity prices,
sometimes in your favour, sometimes not - again, just ensure you
are trading on an informed basis.
I'm not advising any trader to execute a trade solely based
on the prevailing whether report or to buy heating oil just because
it's winter in the U.S.
If you stick to your charts these fundamentally inspired price
movements will provide you with buy and sell signals on a technical
basis rather then having to put the next move on your 'wish list'!
Your adviser can provide you with all the contract specifications
for offshore commodities markets plus all the seasonals, cycles,
main production areas and those other pieces of information that
may assist your trading decisions and expand your knowledge base.
