Commodities trading is a very popular type of trading. Widely happening all around the world, it remains relevant and necessary for so many reasons. From hard to soft commodities and from agricultural, livestock, energy to metals, commodities are traded here and there.
In the earlier times, entering the commodity market was obviously difficult, pricey and exclusive, it’s different and more accessible to people. Nowadays, through various ways, platforms and channels, on top of learning and getting trained, you can be a good commodity trader. By meeting the basic guidelines, you can be part of the commodity market!
But before that and while you study the whole commodities trading thing, you must also beware of the usual pitfalls of commodity traders, both beginners and veterans. In that way, you can avoid them for your own sake and trade better.
Here are 4 common mistakes in commodities trading.
1 – Inefficient or lack of a trading plan
Planning is a must before trading. To be exact, well-thought planning is a must.
Creating an inefficient trading plan is a mistake committed by traders as they do not highly see the value of an excellent trading plan. Worse is the lack of trading plan. Some think that they do not need an in-depth plan before trading commodities because they are “more predictable” than currencies, but later on, they realize that it’s the only thing missing from their trading techniques!
Having no trading plan is like coming to a battle without a single weapon. You are vulnerable to all sorts of trading mistakes and failures, and you cannot even blame anyone. A trading plan is the blueprint that you prepare a lot for and that you will use during trading itself, so you can be careful about every step you take. This plan is done through well-researched and substantial speculation. Without it, you might just be guessing your trade out! And surely, you are just risking your trade!
2 – Failure to maintain stop-loss
Failure to maintain stop-loss is a common mistake in commodities trading.
Stop loss is a component of the financial market that enables you to instantaneously sell your asset if it meets a specific specified price. Using a stop-loss can assist you in minimizing losses when trading commodities since it will promptly sell your transaction if the price drops. After evaluating your risk level, you can set a stop-loss so that you won’t suffer losses after a specific commodity cost. To limit losses and control the inherent risks of commodity trading, a stop loss is crucial. A stop-loss order can be used to guarantee that losses are drastically minimized.
Without stop-losses, you cannot benefit from those merits!
3 – Letting profits slip away because of too much hope
Hoping for something good to happen in your trading is fine, but too much of it might make you lose sight of potential wins that lie around.
As soon as you can, take the profits in front of you. Avoid maintaining your positions in the anticipation of making a huge catch every time. If commodity predictions do not come true, insatiability can work against you. However, timing is everything, and withdrawing money too soon can leave you with regrets. Likewise, don’t rush to relieve people in trailing positions; instead, hold onto them for a bit. You can never predict when a boom will happen.
You are overstaying your position if the market reaches your market goal and you remain in it without a close stop/loss order. Overstaying your position or neglecting to take profits at a set point is one of the most recurring errors made when trading futures. The market will only give one entity a certain sum of money before starting to ask for it back. However, you commonly want to squeeze every last penny out of the deal when you have these earnings, especially paper gains, in your accounts.
4 – Lack of patience
More often than not, lack of patience leads to no good. Traders that are impatiently making unhelpful trading steps and decisions end up regretful. From the beginning stage, including learning and mastering everything about commodities trading from basic to complex, to the actual trading part, you have to be patient and enduring. Dealing with factors that move the prices and with risks involved in commodities trading is the pre-waiting stage of actually waiting for the results. In commodities trading, sometimes, you win, and sometimes, you lose. Without buckets of patience, traders really do not succeed.
Now that you have known the most typical errors and oversights of commodity traders, you can work more carefully and wisely. You can come up with smarter trading actions and be safer from terrible trading outcomes.
Remember, you do not have to personally experience those trading failures before you make a move to dodge them. Learn from others’ mistakes, so you will not commit the same.
ABOUT THE AUTHOR:
Nicole Ann Pore is a writer, an events host and a voice over artist. Quality and well-researched writing is her worthwhile avenue to enlighten and delight others about things that matter. She is a daytime writer for FP Markets, one of the leading forex brokers in the world. Nicole graduated Cum Laude from De La Salle University Manila, Philippines with a Bachelor’s Degree in Communication Arts.