Most of the traders consider commodity trading is a bad idea to trade because it is risky sometimes. From initial margin to volatility market there is a number of reasons an investor can lose quick money in the market. But many investors do not pay attention that the main reason behind losing huge investment is to make some common trading mistakes in the market. The important thing is to avoid such silly mistakes while entering into the trade.
There is no doubt that commodity trading is fulfilled with risks, but there are various opportunity to make good profits too. This is an area where a small amount of capital can provide significant returns but there are some mistakes because of which newbies of the stock market, as well as experienced, lose significant money in the market.
Following are some mistakes to be ignored while trading in commodities
1. Failure in money management – An intelligent trader should maintain risk in the market by adopting various money management techniques in the trading. It helps them to play a safe game in the market as well as boost their profit in the market. Traders get trading tips just like commodity tips, gold and silver tips and other tips in order to take the right decision and avoid loss.
The biggest mistake is not having a good money management skill.
2. Lack of diversification – Most of the traders fail to diversify their portfolios when it comes to commodity trading. Investing huge money in a single position is a reason of disaster in trading. An investor should divide a small amount of money into different stocks in order to avoid the loss because if one of the stocks would perform badly, you still have the other option to recover your investment loss.
3. Overtrading is bad – Overtrading is commonly done by some investors to gain more profit but it leads them to excessive commission and it reduces their long-term profit too. Thus limit your position because you will surely have to pay brokerage on every trade and the greater the number of trades, the greater amount you will have to pay as commission. So, avoid such mistakes, plan your trade as well as your enter and exit time also. You can also seek the help of advisor but make sure they should be sebi registered investment advisor because of an uncertified advisor may be a fraud.
4. Lacking patience – Impatience is bad is every field, It is very much important to track trading results regularly and patiently. Do not take your decisions based on rumor, first search, analysis and then make any decision related to a position.
Keeping these points in mind would help you to manage your trade effectively. So, avoid such mistakes in commodity trading to manage risk and reduce loss in trading.