For many years, the City of London has been known as the world’s premier financial centre.
Anyone who wants to trade commodity & futures contracts can do so in London by opening an account with one of several reputable firms that specialise in this area.
The following easy strategies will help even a complete novice start trading commodities and futures contracts right away.
Make sure you understand
Before you open your first account with any firm, make sure you understand how they charge for their services.
Commodity traders are no different from stock or forex traders when it comes to fees; some firms charge commission on every trade you make, while other firms allow you to pay them a flat monthly fee regardless of how much money is in your account.
Costs of opening an account
Some firms allow you to open an account with just $1, while others require a minimum balance of $10,000 or more.
However much money is required to open your account doesn’t matter too much because you need to understand that if you’re making any regular income from trading, you need to leave this money in the account until it grows substantially.
This way, your capital (the amount of money in your account) can grow at least 25% per year; otherwise, there’s very little chance that you’ll make any real profits over time.
Stop loss orders
With commodity trading, there are no “stop-loss” orders like there are when buying and selling stocks on the New York Stock Exchange (NYSE).
In other words, if you buy a corn futures contract and the price goes up to $5.75, you don’t have the option of selling it for that amount.
You either have to hold on to it until your contract expires or sell it for whatever price is available in the market at the time you choose to pull the trigger and exit your trade.
It all relates to what we were talking about before when it comes to trading capital: if you want to make a living from commodity trading, taking profits when they’re offered means your wins will be correspondingly lower than your losses over time.
Problems occurring due to not making money
Futures traders who aren’t making any money typically struggle with one of two related problems: not enough capital or poor risk management.
If you follow our suggested 25% per year growth in your trading capital, we think it’s unlikely that the amount of money you have will be an issue in making real profits.
Risk management may well be the only major obstacle standing between you and success as a commodity futures trader.
When trading commodities or any other financial product for that matter, the most critical thing is knowing where to enter and exit each trade; this is called “position sizing”.
Without mastering this crucial skill, there’s very little chance you’ll make any money long-term, no matter how much capital might be in your account.
The most challenging part about entering trades is taking losses when they happen because you don’t like it.
You can master this challenging commodity trading area by following the 50/40/10 rule; that is, take no more than 10% of your capital out of your account after any loss.
Also, make sure at least 40% of every winning trade ultimately turns into a profit before you permit yourself to sell the position.
If you follow this discipline religiously, there’s very little chance that you’ll ever have to deal with money management concerns again.
Because the vast majority of traders are undone by having too much invested in losing positions that they refuse to let go of until their entire trading account is drained.
The “30-30” rule
The absolute best way for anyone who has never traded commodities or futures contracts before to develop their own personalised price action trading strategy is to use the “30-30” rule.
It simply means that for every 30 trades you take, at least 30% should be winners, and no more than 10% of your total position sizes should be losers before you’ve turned a profit on the trade.
For more information link to futures trading.