Commodity Day Trading – 3 Essential Tips for Commodity Day Trading

Commodity Day Trading 3 Essential Tips for Commodity Day Trading

With the current volatility and market uncertainty in equities, many people have been looking to commodity day trading for their investment needs. Before you start commodity day trading, I have some helpful tips to relate to you that should be looked at in close detail.

Establish a Well-Funded Account: This is one of the MOST overlooked aspects of commodity day trading. Studies in the past have shown the more money you have on hand in your trading account, the more chance of success you will have.

Why is this? You need to have a well-funded account when commodity day trading because you have to be able to have a margin for error. Not every trade you make will be a winner; you will have losers. In commodity day trading, what matters is limiting your losers and letting the winners run.

DO NOT Over-Leverage Your Account: Many people who want to begin commodity day trading will start to look into the lowest margins they can get, specifically for the e-mini stock indices. Some places may be able to give you day trading margins as low as $500.00. It's fine to use this day trading margin, but DO NOT overdue it.

If you are starting commodity day trading with a $5,000.00 account size and are using a $500.00 day trading margin, do not look to use up every penny in your account and trade 9 or 10 contracts at once. This is suicide, and most likely, your account will go into debit fairly soon.

As a general rule of thumb of using leverage in trading, I NEVER recommend using more than 20% of your account equity toward one trade, in the case that would be 2 contracts at a time.

Trading the Commodity Markets IS NOT a Get Rich Quick Scheme: In fact, there is no such thing as a "get rich quick scheme" in any industry (besides the lottery of course, but then again, try making a career out of that). When commodity day trading is practiced in good principle, you can experience good returns.

You have to realize that you are trading the markets in a short-term time frame. The shorter the time frame in commodity day trading, the higher amount of volatility you will experience. The higher the volatility there is in the marketplace, the higher the risk you take on and the higher the potential reward you are aiming for.

Trading is a practice that should be exercised only when exhibiting great discipline. These 3 rules will get your mentality started in the right direction, but there is much more to learn in order to become a well-rounded day trader.

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