The author looks at ways of protecting your capital when trading commodities.
The commodities / futures markets empty the accounts of thousands of traders every year. For most entering trading, and this is true for over 90%, trading commodities means a very certain financial death.
The markets are ruthless and will send people home empty-handed without a care.
The opportunities for making money are numerous, and the leverage entices so many people to jump in head first, that it is unreal. It is the ultimate, white collar get-rich-quick arena.
Unfortunately, like all other areas that the get-rich-quick opportunities are being sold, the ratio of losers to winners is absolutely horrific.
First thing to do to avoid being one of the carcasses left on the battlefield is to realize that trading is not for everyone. It is definitely not for the squeamish or weak of heart. You?ve got to have resources and a backbone of steel.
Secondly, realize that it does take knowledge. If it were that easy to make millions in the markets, don?t you think that it would be saturated with people by now? Just like any other business endeavor, you have to have a clue as to what you?re doing. No one is standing at the gates with a bag of money to hand you, just because you showed up. You actually do have to ?earn? your fortune here.
Third, recognize that it takes skill. For every opportunity to make money in trading, there are ten ways to lose it. There are several skills necessary to spot the opportunities, but more importantly the skills to plan worthwhile trades and then to properly execute them to show a profit at the end of the month.
You have to first know what skills to develop, and then have the fortitude to actually develop those skills and put them into practice. Too many people want to ignore this part and just go straight to collecting the profits without any effort.
Fourth is to expand your awareness. Get past the greed factor that pressures you into wishing every trade to be that home run that let?s you retire this month. If you want this to be a profit center for years to come, then treat it as such: |long term. Get your focus on doing it right the first time around through preparation, learning and a long term focus.
The other aspect of awareness is self-awareness. Make sure that you?re trading with a system that matches your emotional style. You wouldn?t get into an occupation that disagreed with your natural tendencies and desires would you? Would you take a job that required 80% travel if you hated to travel? NO! The only way to trade successfully for the long term and enjoy the process is to be aware of your own tendencies and desires, and use a strategy and system that are in alignment with who you are as a person.
Most importantly, you?d better be trading with true risk capital. If you?re trading with ?scared? money, that is money that you really can?t afford to lose, then your days as a trader are numbered. You?d probably be better off quitting right now and taking home whatever is in your account.
If you HAVE to make money with your trading capital, you are going to lose it, almost guaranteed. The emotional pressures in trading are enormous, and adding the need to make money will only cloud and distort your thinking to the point that you make poor trading decisions. In trading, the leverage will put you on the path to ruin with the first major mistake that you make, if you?re an emotional mess.
The best way to avoid certain death in trading is to first safeguard yourself against all the pitfalls that are there. If you are naïve about trading, your biggest risk is your ignorance. The pitfalls are killers in trading, and you can?t afford to fall prey to the traps that await you.
Survival requires wisdom, prudence and good guidance.