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Sunday 31 July 2016

Commodity - 5-Basic-Tips

Best 5 tips to follow when the commodity market is unpredictable / Risk Management- Basic tips for the investor'
Commodity markets have tremendous impact on economy of countries and the life of people. Though demand-supply is the prime factor behind the price volatility, currency moves, geopolitical issues, economic growth and government policies are the other factors influencing commodity prices essentially. Typically, the commodities markets are subject to rallies and crashes, so it is more susceptible to speculation than the stock markets.
Before entering into commodity futures, one should be prepared and ready to learn how the futures market works. Futures contracts unlike stocks have different expiry periods. As the futures platforms are primarily intended for hedging with a view to reduce the risk in portfolio, those who are entering into commodities segment without fully understanding the fundamentals of the contract result in losing their initial capital or a part thereof. Anyhow, if we follow few certain guidelines before investing in futures, it could help to reduce the threat of losses and help maximize the profits.
Predetermining of Risk-Reward and diversifying the capital
It is very essential to articulate the proportion of risk and reward. One must know in advance that how much risk he can afford on his available capital while trading in futures. Also, never invest the whole money in a single commodity. The best option is to allocate the capital in different assets, so any wrong trade resulting in a loss can easily be halted. In addition, while facing any unsure situation, the ideal strategy would be to stay away patiently until a clear picture is revealed. Executing a bad decision is worse than not trading at all. As compared to equities, commodities futures contracts provide greater flexibility to the participants, helps the hedgers to protect their physical position and attract more speculators. Hence, predetermining the risk reward is vital to overcome the large number of speculative traders.
Maintaining Stop Loss
Trading in commodity futures includes a certain degree of risk as it is influenced by various factors, it is essential to protect positions ourselves. Using a sell or buy stops to contain the losses at a comfortable level or through using hedging strategies are important. The main reason why traders give up trading is due to suffering huge losses as they normally would not place a stop loss in their trading strategies. It has been noticed that maintaining appropriate stop losses helps to minimize losses and maximize profits.
Constant market attention
Every successful trader has his own system of trading that helps them to improve profits and keep losses at minimum. These techniques can be gained by constant market attention over a time by traders themselves or in combination with other trading system. Avoiding common mistakes will help to improve winning more games. Plan before trading is also very important. Any sudden moves in prices may not be a proper entry or exit point of your trades.
Don’t rush to take profits if you are on the right way
It has been noticed that traders with little experience rush to book profits on their winning strategies at the first instance, but hold on to the losing strategies to accumulate losses. It is very important not to close the winning trades too early. Always try to trail the market price by continuously revising stop losses and grab maximum profits in such trades. Fear and impatience may lead to unfair decisions, so avoid it.
Be prepared and never go through rumors.
A new trader in commodity should start with a small initial capital. Never go beyond rumors and invest the whole capital at a time in hopes of profiting quickly and easily. A good futures trader can make profits at any market conditions. A clear knowledge on world-related events which influence the price fluctuations would help greatly in taking appropriate decisions. Applying of fundamental and technical analysis will help the trader to spot more trading opportunities. Attending seminars and understanding the mistake of other traders will help in identifying the pitfalls and avoiding the same.
Apart from the above said strategies, it is very important to control one’s emotions. Fear, anxiety and greed are the common traits of human beings, overcoming such emotions are must for every winning trade. To develop confidence in trading is also essential. Confidence based on solid research helps to overcome emotional trading decisions. However, real success in trading comes with discipline and experience.


Parag Patil is a technical analyst and trading system designer with stock excel programmer. I hope the articles and live chart of nse future and mcx on this Website will be as helpful and profitable to you . I try to update and post new articles tips everyday. My motto is to encourage the traders, so that they should able to understand the technique views behind the moment of stocks. I have deeply analyzed with many technical indicator with parameter and added to my amibroker afl. And even taken backtest report which is never being implemented. Any of the analyst expect me. Seeing all this you may understand that my views is more technical than commercial. If you are profited by my views I fill happy.

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