Commodity trading is not like your typical investment business. You may earn a decent amount of money taking trades in the Forex market, but in the commodity market, you have to focus on many important aspects. So, the ultimate question is, if commodity trading is so hard why do pro-UK traders prefer commodity trading?
Compared to the price movement of the currency pairs, commodities are much more stable and offer great rewards to the trend traders. The pro investors will take the slightest advantage when it comes to the investment business. Now let’s learn some effective ways to trade the commodity market.
Study the price movement
The price movement of the commodity market is not similar to the currency pairs. You will notice the key difference just by seeing the candlestick charts. Gaps are very common at CFD trading and you won’t be able to make a profit by using the currency trading strategy.
Spend a minimum one month studying the historic price data of the major commodities and you will know the key difference. Never think you can become a good trader without studying the price movement of the commodity market. The elite brokers know this and therefore always offer a great demo account to retail traders so that they can learn to trade.
Learn about the trading hours
In the currency trading business, the trading session doesn’t matter if you focus on the short term trend. But the case is completely different for commodity CFDs. You have to know about the trading hours for each asset.
Let’s say you want to trade coffee and soya beans. If you execute trade odd hours, you won’t get enough volatility. Covering up the spreads and commissions will be a tough job. Focus on the trading hours while you deal with the commodity market.
Devise a trading method
You must devise a unique trading method to earn a regular profit from this market. Without devising a promising trading method, you will lose money most of the time. The traders think they know a lot about this market.
To them, trading is the most unique way of making a profit. In reality, trading should be done in an organized way. As a currency trader, you should follow a unique trading strategy specially designed to trade the commodities in the market. You can depend on the demo account to develop this skill and this will help to earn a significant amount of profit.
Curate a risk management plan
Being a commodity trader, you will still have losing trades. Losing money is very common in the investment business. To survive in the investment plan, you must have a rigid risk managing plan. Stop risking more than 2% of the account balance and look at the long term goals.
Forget about the key factors of the market and try to come up with a unique idea so that you don’t have to lose too much money in trading. The trades need to execute with high risk to reward ratio so that they can cover the loss with a great level of ease.
Focus on your skill
To learn commodity trading, you must be honest. You can’t deny the fact, you have a lot to learn about the CFD market. Focus on your skill and gather information so that you can know more about this market.
Stop thinking like an aggressive trader and create a long term vision. Instead of taking the trades most aggressively, curate the trading plan based on your knowledge. Study books, articles and read the newspaper so that you stay tuned with the world economy.
Ignoring the key factors of the global economy is a very big mistake and will always lead to big losses. Stay updated with the major news to become a good trader.