If you are reasonably new to commodity future trading then do keep in mind that there a number of things that can go terribly wrong - there is a large risk factor here. With this in mind its wise to risk only the capital you can afford to lose and nothing more. Do not borrow as I have done myself. Too much risk to take - believe me!
The key thing to keep in mind is to risk only that money you can afford to lose. Online commodity futures trading is not about rushing to make the biggest gains possible and then retire.
Commodity trading though is still risky. Ideally you should reduce your risk and exposure and therefore the main thing is to only limit your investment to the amount of money you could afford to lose.
Many commodity traders, particularly those that are fairly new to the business, try to utilize too much leverage. As an example of this lets take 100 ounces of gold as a contract with a value of $1000 an ounce. Total value is $100,000. The margin (deposit) will probably be around 10% of the value of the contract, thus $10,000.
Now this is where the problems begin to arise. A commodity trader who is being bullish on gold may think its a good time to buy into 10 gold contracts at a cost of $100,000 to their trading account. So if the price of gold were to move to $1100 an oz. then all is well and the money in the traders account doubles.
If things do go well then great, life is good and all is well, but chances are that if you continue to trade in this way - which is to some extent a gamble - you will lose out in the mid to long term.
With online trading there is a large advantage over what was previously available because of the speed of update to market fluctions. Login to your trading account at any time of day you like and you are updated to the second, or at least to the minute, regardless of the country your investments are made in.
Trading online commodity futures does provide for advantages over the old way because keeping up to date with the market is simple and very fast. Its perhaps even easier now for the inexperienced trader to feel safe due to this online flexibility and speed of action and thus become over exposed in the first place. Leverage being offered by the broker is a great thing but only when used wisely so be sure to do things in moderation. - 23309
The key thing to keep in mind is to risk only that money you can afford to lose. Online commodity futures trading is not about rushing to make the biggest gains possible and then retire.
Commodity trading though is still risky. Ideally you should reduce your risk and exposure and therefore the main thing is to only limit your investment to the amount of money you could afford to lose.
Many commodity traders, particularly those that are fairly new to the business, try to utilize too much leverage. As an example of this lets take 100 ounces of gold as a contract with a value of $1000 an ounce. Total value is $100,000. The margin (deposit) will probably be around 10% of the value of the contract, thus $10,000.
Now this is where the problems begin to arise. A commodity trader who is being bullish on gold may think its a good time to buy into 10 gold contracts at a cost of $100,000 to their trading account. So if the price of gold were to move to $1100 an oz. then all is well and the money in the traders account doubles.
If things do go well then great, life is good and all is well, but chances are that if you continue to trade in this way - which is to some extent a gamble - you will lose out in the mid to long term.
With online trading there is a large advantage over what was previously available because of the speed of update to market fluctions. Login to your trading account at any time of day you like and you are updated to the second, or at least to the minute, regardless of the country your investments are made in.
Trading online commodity futures does provide for advantages over the old way because keeping up to date with the market is simple and very fast. Its perhaps even easier now for the inexperienced trader to feel safe due to this online flexibility and speed of action and thus become over exposed in the first place. Leverage being offered by the broker is a great thing but only when used wisely so be sure to do things in moderation. - 23309
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