Slow Stoch above Nasdaq Stoch. Tell your friends about us and earn rewards. WebTrader Client Login Sign Up Fund Your Account. If I haven't scared you away so far, let's take a closer look at what successful commodity trading is all about. EMA 15 crossed EMA Momentnum new 6 month high.

By Bruce Babcock Before becoming too excited about the substantial returns possible from commodity trading, it is a good idea to take a long, sober look at online commodity trading risk risks. Reward and risk are always related. It is unrealistic to expect to be online commodity trading risk to earn above-average investment returns without taking above-average risks as well. Most people are naturally risk averse. They don't like to take big risks, especially financial risks.

Perhaps you can relate to the point of view of humorist Will Rogers: "I am not as concerned about the return on my money as I am about the return of my money. It is true that a high percentage of traders eventually lose money. Many people have lost substantial sums. There is a famous old line about the best way to make a small fortune trading commodities. However, commodity trading's reputation as a highly risky activity is somewhat undeserved.

Think of yourself walking into a gambling casino in Las Vegas or Atlantic City. You decide to play roulette. Commodity trading is the same in the sense that the individual is the one who decides how he wants to operate. He can make large bets or small ones. You could trade a long time this way and only lose a few thousand dollars. However, most people are not that patient. The unfortunates who lose big are those who can't control themselves. They take big risks in an attempt to get rich quick.

Another way to lose big is blindly to turn your money over to others to trade such as brokers or money managers. One of my favorite quotes about trading comes from trading psychology expert Mark Douglas. As he points out, most of us are not as willing to take financial risks as we think: "Most people like to think of themselves as risk takers, but what they really want is a guaranteed outcome with some momentary suspense to make them feel as if the outcome had been in doubt.

The momentary suspense adds the thrill factor necessary to keep our lives from getting too boring. Managing the risks of trading is a very important part of any trader's success. Although the risks can be managed, they can never be eliminated. Remember that the high returns successful speculators can earn are available only because the speculator is being paid to take risk away from others. When a commodity trader buys a futures contract, he will lose if the price declines. His risk is theoretically limited only online commodity trading risk the price of the commodity going to zero.

If he sells, he will lose if the price goes up. The risk is theoretically unlimited because there is no absolute ceiling on how high the price of the commodity can go. In practice, however, the trader can online commodity trading risk his position when the trade is going against him to limit his loss. While a prudent trader always has a plan to limit his losses when trades don't work, it is not possible to guarantee a particular loss limit amount. As a practical matter, however, you can usually limit losses to within a few hundred dollars of an intended amount.

Only when very unusual things happen suddenly can losses balloon to thousands of dollars more than you expected. A good example of this was what happened to many traders in stock index futures just before the Gulf War started in In The New Market Wizards by Jack Schwager, respected money manager Monroe Trout describes his ordeal: "January 9, was the day that Secretary of State James Baker met with the Iraqi ambassador in an effort to avert the Gulf War. At the time there was a reasonable degree of optimism going in to the meeting.

Addressing the press after the meeting, Baker began his statement with the word 'Regrettably. Although on most days that system didn't trade at all, it was unlucky enough to be in a long position that morning. Therefore, this once in-a-decade event would have cost about twenty percent or less of a reasonably capitalized account. Other kinds of surprise situations that online commodity trading risk cause unpredicted losses are freezes, floods, droughts, government currency interventions and crop reports.

With attention and foresight a trader can sidestep these risky situations. The best way to control unpredictable risks is to trade conservatively so larger-than-expected losses are still only a small percentage of the total account. Another thing to understand about risk in trading is that you cannot avoid losses by careful planning or brilliant strategy. Numerous losses are part of the process.

In The Elements of Successful TradingRobert Rotella puts it this way: "Trading is a business of making and losing money. Any trade, no matter how well thought out, has a chance of becoming a loser. Many people think the best traders don't lose any money and have only winning trades. This is absolutely not true.

The best traders lose a lot of money, but they eventually make even more over time. While people tend to take losses personally as a sign of failure, good traders shrug them off. The best trading plans result in many losses. Because of the amount of randomness in market price action, such losses are inevitable. If I haven't scared you away so far, let's take a closer look at what successful commodity trading is all about. Commodity Futures Trading for Beginners.

The Risks of Trading Commodities. Before becoming too excited about the substantial returns possible from commodity trading, it is a good idea to take a long, sober look at the risks. Commodity trading has the reputation of being a highly risky endeavor. Anyone who is going to try speculation should be fully aware of and be comfortable with the risks involved.

There is no point trading commodities if you cannot handle the psychological discomfort of making losing trades.

Shaping risk management in Commodity Trading Firms

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