How to Manage Your Commodity Account

Having a commodity account gives you access to trade in the very dynamic commodities market. As a trader, you will want to make sure that you handle your account like a pro. Here are a few tips on how to manage your commodity account.

Withdrawing Profits

As a commodity trader, you will immediately begin to realize just how volatile the market can be. It can be up one minute and down the next. This can put you at a very large risk of losing money in your account if you are in a trade. Therefore, one thing that you may want to consider doing is withdrawing profits periodically. Instead of leaving all the money in your account to grow, you might want to withdraw all the money that you have made over a certain period of time and just leave your original starting balance. This will ensure that you protect your capital and do not lose too much of it at one time. Many traders implement this strategy because of the rapid movements in the market.

Money Management

In addition to withdrawing your profits periodically, you will need to employ strict money management rules. A trading system in any market is only as good as the money management that is employed by the trader. You need to come up with rules for yourself and stick to them every single day. Most traders recommend risking only 1 to 3 percent of your account on one particular trade. Therefore, this could require that you start out with small trades and work your way up depending on how large your initial account balance is. You will also want to use a strict stop loss on each order that you place. This will make sure that you do not lose more than you can afford to lose on one trade. Over time, good money management coupled with a good trading strategy will help you profit from the commodities market.

Be Aware of News

A very important practice to get into when managing your commodity account is constantly monitoring news announcements that could impact your trades. There are a number of different times when news announcements will directly affect the prices of commodities. It is at these times that the market can be very unpredictable and can make wild swings. Therefore, you need to be aware of when news announcements will take place and plan on them in your trading style. This can help you keep your account intact in the long run.

Trade What You Know

It is very difficult to become an expert in trading several different types of commodities. As a commodities trader, you will want to become proficient at trading one or two commodities. Once you master those, you can move on to other things. However, many traders try to trade everything all at once and end up ruining their accounts. Start with what you know as a trader and build upon that.