Commodity Trading Pitfalls and Feats

2007-03-08 10:33:40

( Financial )



For the average investor with limited money, commodity trading is a godsend. With little investment, there is potential for large profits, quickly, as well as lower commissions to give out compared to investing in individual stocks.

Commodity trading lets you invest on a sector, such as rice or other crops, by betting on the direction of its price. Unlike in stocks, you do not buy or own anything. Rather, you just make a prediction on the price and deposit your investment to the commodity brokerage. If you predict correctly, you gain. Otherwise, you lose. This system is generally advantageous for the buying public as it helps keep the prices from changing.

Like other forms of investment, however, commodity trading has equal possibilities for loss and return. The amount of your profit or loss is as big or small as your investment. While risks are inevitable, they can be managed properly to limit its possible damage.

Getting Started
Foresight is an essential tool in commodity trading. It may be difficult to predict price trends, but you can limit your potential loss by playing safely.

If you are interested in trading commodities, it is important to prepare yourself for any possible outcome, especially for losses. When you have prepped yourself, speak with an experienced commodities trader or a commodities trading broker. They should be able to help you start with your commodity trading.

Familiarize yourself with price charts. These charts will tell you how the market is going and help you decide on which direction to go—go short (sell) or go long (buy). Ask a commodities broker for assistance on joining a commodities brokerage and maintaining a commodities trading account with them. Different brokerage firms have different house rules so gather a lot of information and ask your broker a lot of questions. You may also opt to join an online commodities trading website.

Do It The Right Way
In commodity trading, you hold your own fate. Your gains and losses are dependent on your bets, and your bets are influenced by both your foresight and logic. Avoid investing big sums, and do not put everything on one investment. Disperse your resources. It is better to have several small investments and winning and losing in some of them than risking to lose everything in a single investment. Lastly, save some for yourself. Do not rely on your wins all the time. If you have savings, losing your investment will just feel like loosing in poker.


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