4 Reasons Professionals Succeed in the Commodities Market

The commodities market represents a viable alternative to more traditional forms of investment like stocks and bonds. However, it is no place for amateurs. Here are a few reasons that professionals succeed in the commodities market.

1. Proper Mindset

Perhaps the most important thing that a professional trader has is the proper mindset. Trading in the commodities market is unlike trading in the stock market. Since most traders are familiar with the stock market, they do not feel comfortable dealing in the commodities market. Therefore, they do not know how to handle the way things work in this market. Prices can swing wildly in the commodities market and professional commodities traders know this. Those that have never dealt with the commodity market can be scared by the sudden movements. It is at these times, that many trading mistakes are made because many decisions are based on emotion. Professional traders learn to deal with fear and stick to what works.

2. Sufficient Capital

Another reason that professional trader succeed in the commodities market is that they are properly funded. The commodities market is no place to invest a few hundred dollars. In order to really succeed in this market, you will need an account that is large enough to sustain some losses and be able to keep moving. Many casual traders try their hand at the commodities market by trading $200. Then they quickly lose this money and get discouraged. Professional traders typically trade large accounts and they know that some losses are inevitable. If you can weather the losses and keep on going, you will still be in the market to profit another day.

3. Proven Systems

Many professional traders also use a variety of proven trading systems that work in the commodities market. They may spend years perfecting their trading systems and learning new systems. Amateurs try to get into commodities market and trade with a very vague idea of what they are doing. They may not actually have a successful system under their belt. This is usually a recipe for disaster and has blown out many accounts over the years.

4. Money Management

Money management is a vital part of any professional traders repertoire. If you are going to trade successfully, you will have to employ some form of money management to your account. Regardless of how good your trading system is, without money management you will not be able to retain your capital and make any money. For example, you should decide that you will not risk more than 1 to 3% of your account, on any given trade. In order to make this happen, you may have to adjust to trade and watch it closely. Once you meet your defined stop loss, or take profit, you get out of the trade regardless of what else is happening. Ultimately, this will allow you to keep trading and making money in the long-term. Many traders try to hit a home run right away. Professional traders know the small wins will ultimately get them to their goal.

blog comments powered by Disqus
Scottrade