(Akiit.com) Commodity trading is not an easy task. While value does fluctuate, it’s not as intense as the stock market, so you can keep some comfort within that fact. However, there are things that every commodities trader should know in order to fuel their long-term profitability and success. Anyone unable to do this is likely to fail at the first hurdle.
Commodity trading is also worrying for a newcomer to enter. Focusing on raw materials might be much different to anything they are used to, and so getting involved in the jargon and flow of business could be dizzying to a degree.
We’re here to offer you four tips that every commodity trainer should know. We hope they help you on your journey.
Know Your Market
It’s important to know what you’re getting into. The flow and pricing of gold will be much different than steel, which will be much different to iron. Every commodity you trade is almost like a mini investment business, something which you must know. You must understand how to educate yourself before you even step a foot in the water. Not only that, but you must take an ever-present approach to your education here. See Commodity.com for tips and advice to get you started. As you build a network of peers you will become more skilled in the flow of this market, but you must submerge yourself into building knowledge first and foremost.
Keep A Plan
You must always keep a plan before making a trade, or investing in even a plank of wood. Traders will often neglect this so as to jump on a deal they consider time-limited. However, before you purchase a commodity you must know its purpose. Are you purchasing to fulfill a contract? Are you hoping to supply a business with future materials, using your current relationship as a bedrock? This plan will also help you avoid the dizzying high-risk gambling of the commodities market, something many investors will become addicted to. Stay wise, stay careful, and always think two steps ahead.
Diversify
Never put all of your money into one investment. A deal gone bad could take you out of the game prematurely, much more rapidly than you might have expected. It’s important to understand that risking even 10% of your startup cash can be inadvisable. Start off small, and as you build your competency that way, develop further.
See Patterns & Trends
Commodities fluctuate less than their stock counterparts, but they are still affected by patterns and trends in the market. For example, fossil fuels are slowly dying out as more and more businesses (and nations,) understand the benefits of sustainable and renewable energies. It might be that gold trim is now the fashion in the supercars of Dubai, and a hefty price tag is being supplied by the demand. Read the news, read business journals, check IRC’s and Twitter, and if you have the feeling of profitability and pattern recognition in your gut, then go for it.
With these tips, your first forays into commodities trading should be successful.
Staff Writer; Terry Ball