Commodity Futures Trading - How To Reduce Risk And Aim For Success
If you are considering going into and trading online commodity futures then do keep in mind that there is a large element of risk involved unless you reduce your risks and exposure with care. A such its sensible only to risk the capital that you can afford to lose and before doing anything take time to learn about futures trading to ensure your exposure is never more than it should be.
The key thing to keep in mind is to risk only that money you can afford to lose. Online commodity futures trading is not about rushing to make the biggest gains possible and then retire.
Commodity trading though is still risky. Ideally you should reduce your risk and exposure and therefore the main thing is to only limit your investment to the amount of money you could afford to lose.
A common issue with trading in commodities however is that many traders carry with the commodity too much leverage. So for example, take a 100 oz. gold contract with a value of $1000 an ounce and thus a total value of $100,000. The margin or if you prefer - good faith deposit - to have 100 oz. of gold could be around 10% of the total contract value, which is $10,000.
Let us take an example to illustrate things, shall we. Let us presume that we invest in 100 ounces of gold which is selling at $1000 an ounce. The value of the gold would therefore be $100,000. The margin or good will deposit we have to make is $10,000 towards the $100,000 worth of gold - a total of around 10% is normal.
If things do go well then great, life is good and all is well, but chances are that if you continue to trade in this way - which is to some extent a gamble - you will lose out in the mid to long term.
Of course if things go well then the trader is well on the way to a very nice income from this investment. However by such exposure, any down turn in the market place could lead to serious losses and thus its seemingly more of a gamble than a calculated trade.
So the basics to be aware of if you are just setting out with your commodity future trading then take it easy - do not rush to make lots of money as you will most probably end up being over exposed and therefore open to some hefty account losses. Its best to learn with experience, but while you are learning do think about tomorrow and keep enough funds available for times when things take a downturn. - 23159
The key thing to keep in mind is to risk only that money you can afford to lose. Online commodity futures trading is not about rushing to make the biggest gains possible and then retire.
Commodity trading though is still risky. Ideally you should reduce your risk and exposure and therefore the main thing is to only limit your investment to the amount of money you could afford to lose.
A common issue with trading in commodities however is that many traders carry with the commodity too much leverage. So for example, take a 100 oz. gold contract with a value of $1000 an ounce and thus a total value of $100,000. The margin or if you prefer - good faith deposit - to have 100 oz. of gold could be around 10% of the total contract value, which is $10,000.
Let us take an example to illustrate things, shall we. Let us presume that we invest in 100 ounces of gold which is selling at $1000 an ounce. The value of the gold would therefore be $100,000. The margin or good will deposit we have to make is $10,000 towards the $100,000 worth of gold - a total of around 10% is normal.
If things do go well then great, life is good and all is well, but chances are that if you continue to trade in this way - which is to some extent a gamble - you will lose out in the mid to long term.
Of course if things go well then the trader is well on the way to a very nice income from this investment. However by such exposure, any down turn in the market place could lead to serious losses and thus its seemingly more of a gamble than a calculated trade.
So the basics to be aware of if you are just setting out with your commodity future trading then take it easy - do not rush to make lots of money as you will most probably end up being over exposed and therefore open to some hefty account losses. Its best to learn with experience, but while you are learning do think about tomorrow and keep enough funds available for times when things take a downturn. - 23159
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Want to learn more about commodity future trading? We specialize in natural gas futures.
posted by X - Men @ 2:11 AM
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