Are you following these forty commodity trading guidelines? Follow them all and you have a better chance of becoming a consistently profitable commodity futures and options trader. Design your trading plan around these rules. Don't underestimate their value for your success.
Switch Brokers If You're Not Happy
9) If you are not doing well with your commodity futures broker, instead of changing firms call the branch manager and ask to switch brokers. He will listen to your ideas and can usually match you up with someone more suited. You may ask to speak with several different brokers before making a decision. A commodity brokerage firm will always be happy to help you find a more suited broker rather than losing your account.
A Trading Loss is an Opportunity to Reposition Yourself
10) Look at a small loss as a new opportunity to reposition yourself at a better price. This assumes you still like the trade's probabilities.
Are you following these forty commodity trading guidelines? Follow them all and you have a better chance of becoming a consistently profitable commodity futures and options trader. Design your trading plan around these rules. Don't underestimate their value for your success.
Switch Brokers if Not Happy
9) If you are not doing well with your commodity futures broker, instead of changing firms call the branch manager and ask to switch brokers. He will listen to your ideas and can usually match you up with someone more suited. You may ask to speak with several different brokers before making a decision. A commodity brokerage firm will always be happy to help you find a more suited broker rather than losing your account.
A Trading Loss is an Opportunity to Reposition Yourself
10) Look at a small loss as a new opportunity to reposition yourself at a better price. This assumes you still like the trade's probabilities.
Learn To Sit On Your Hands
11) One of the most difficult things is to sit on your hands during a profitable trade. This is a critical skill to be developed. Many times we’re right-on with our analysis but we liquidate a profitable position during minor adversity. Remember that futures contract markets will always fluctuate and do everything they can to get us out of a good position. Our ego wants to be right on every trade in the short term.
To let profits run means we will have a lower win/loss ratio and the ego hates this. Faith and discipline will control the ego so that we take a longer protracted view of our commodity futures contracts and options trading. This point cannot be overstressed. Read this rule a second and third time.
The Bottom Line is Always The Bottom Line
12) The acid test for any trade is the profit or loss bottom line. It doesn’t matter how good the price action or fundamentals are. Unless the futures contract or options trade is making money after a reasonable period of time, consider getting out and wait for another opportunity. The best trades often take off immediately in our favor. Give them every chance to work and be patient, but know when time has run out and you are beating a dead horse. If you are disappointed, then probably others are too. These kinds of conditions create adverse moves against you that can be sharp and fast. Surprises and disappointments can cause panics.
Reversing Your Position is Usually a Mistake
13) Contrary to conventional commodity trading market lore, immediately reversing a position is usually a mistake if taken over a long series of trades. This practice often leads to bigger and worse trading habits that culminate in scalping. Reversing will work well occasionally, but the odds are better if you exit and calmly reevaluate the situation. If you decide to reverse and go short, wait for the next minor rally even if it is at a less favorable price. Always wait to sell a rally or buy a dip...always.
If you are very focused and an exceptional futures trader, you may even see a trade set up as a failure in the first place and then take this "reverse position" trade from the start. However, if this practice is done too often, it can lead to a worse habit; second-guessing yourself. The key is to consistently monitor yourself while being flexible. We all need course corrections once in a while. Commodity futures contract and options peak trading performance is all about flowing with the market with our techniques and psychology.
Keep a Trading Log And Read It Often
14) Keep a commodity futures trading log describing your reasons for entering and exiting. Make notes of what you've learned. Over time, transfer them to a master log and read them every month. Our memories are short and we need to be reminded of things we already know. A trading log is the key to consistency and becoming a professional. You need every edge you can get. This is one of them.
Part Three of Seven, Coming Next! There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.
Thomas Cathey directs the managed futures division of Thomas Capital Management, LLC. Get FREE, the complete 44+ lesson, "Thomas Commodity Trading Course" by visiting: http://www.thomascapitalmanagement.com/commodity/welcome.htm It's brand new... a "street-wise" trading e-course. Get an edge trading futures, day trading e-mini's and selling options. Also learn how "TimeLine Trading" and rare "Ninja trades" can improve your trading results. For more helpful trading info, visit the main Thomas Capital Management trading website at: http://www.ThomasCapitalManagement.com
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