The commodity trading business has always been a very challenging task for novice traders. Those who have extensive knowledge about the market usually trade the commodity market. Being a new trader, you might think that you can’t become a commodity trader since it requires an extreme level of skills. However, if you take smart steps and follow some cardinal rules, you can trade the commodities with a high level of precision.
There are many ways by which you can improve your commodity trading skills. In this article, we are going to highlight the top four most prominent tips which will allow you to trade the commodity market with a high level of precision.
1. Practice in the demo account
There is a common saying out there, practice makes perfect. If you want to become good at trading, you must learn to trade in the practice trading account. There is no reason to risk money when you can learn things without taking any risk. While trading the demo account, you need to take things very seriously. If you ignore the important details just because you are trading the market in the paper trading account, you will never learn the art of trading.
A demo account should be considered a blessing as you can develop a professional trading strategy without any real risk exposure. Try to develop a simple trading strategy so that you can trade at the critical support and resistance level. Once you become good at that, you will become much more confident with your actions.
2. Learn from your mistakes
After trading the market in the demo account, you will be able to identify your mistakes. Make sure you learn from your mistakes as it will make you a better trader. The top traders at Saxo markets consider the losses as a unique opportunity to boost their trading skills. They never become upset with their actions since they know they can revise their trading strategy and make it much stronger. If you bring any slight change to your existing trading system, make sure you test the efficiency of the system in the demo account.
Never trade the market with a revised trading strategy without back-testing its performance. Take your time and try to learn more about the market dynamics so that you can make better decisions. Avoid making the same mistakes in the commodity market, as it will ruin your career.
3. Learn to use the candlestick pattern
Professional traders always trade the market by using the candlestick pattern. They rely on the price action trading method as it helps them to find the best possible trade signals in the market. While learning about the price action trading method, you might get frustrated by seeing the tons of candlestick patterns but there is a simple solution. Instead of learning hundreds of patterns, focus on the most reliable patterns.
Try to understand why candlestick patterns work in the market. Once you understand the psychological reason behind the working mechanism of the candlestick pattern, you should be able to boost your decision-making skills. You will no longer memorize the candlestick patterns in the market.
4. Learn risk management policy
To safeguard your trading capital in the investment industry, you must learn to protect your trading capital. Never take the trades with high risk. While taking the trades, consider the worst-case scenario as it will help you to reduce the risk exposure in every trade. Focus on the conservative method and try to find the trade signals in the higher time frame. Though the higher time frame trading method is extremely boring, it is the most effective method to reduce the losing trades.
Stick to your risk management policy no matter how many trades you lose in the market. Risk only 1-2% of your account balance and make yourself comfortable. Once you are able to follow these rules properly, you will no longer struggle in the commodity trading profession.