How to Start Commodity Trading

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Commodity trading is one of the most popular and competitive business field that one person might participate in. Making a sound trading plan is the initial step that you could do in order to reach your success in commodity trading. Inconsistent and variable trading will slowly drain your account without using a trading plan. So while gearing up in starting your first commodity trade, here are some easy steps that will help you avoid imminent frustrations and disappointments with regards to this type of trade.

  • The market of commodity you want to trade:

    It is important to first decide what type of commodity you wish to trade. Active traders seek long term trading in primary commodities like grains, energy, metal, livestock, and soft commodities. Some traders who want to diversify their trade look for all opportunities in every commodity.

  • Setting up the size of your account:

    Each broker should set up a starting account with the normal range of $5,000 to $10,000 as their minimum account size. Normally, each brokerage firm usually starts at around $5,000 but some traders go as low as $1,000 for their trade. As the beginning amount of your account is still smaller compared with those who set up in high finances, do not be low-spirited since this only means that you are providing more chances for yourself to go up the investment ladder. The wise thing that you can do is to limit yourself from unpredictable markets and avoid too much risk on your trade. You can trade a minimal of two contracts at a time.

  • Risk management in commodity trading:

    The most effective way in handling your investment in commodity trading is by managing your risks. At the top of your trade checklist is regulating your portfolio risk. Avoid too many positions with your trade. For instance, some traders do not risk more than one to two percent on a given trade. However, some small traders will not risk money exceeding $500 on small accounts. And the best thing that you should master in order to survive the training arena is by not letting single trades ruin the account you have.

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