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Commodity Market Trading System
If the commodity broker fears his own poor trading
record, it is easier to make full use of the client's
capital by loading him right in the beginning. In
contrast, when committing to trades slowly and holding
cash in reserve, a client is more apt to close his
account if part of it erodes, before much damage is
done. So, you can see the incentive for a commodity
broker with a poor trading record to try to put most of
the money into the market quickly. It's sad, really. I
have no problem with poor trading. There are times when
I can't trade out of a wet paper bag. We all have our
bad times. But what bothers me is putting too much money
at risk with an all-or-nothing attitude. Just be alert
to this. It's YOUR money at risk.
Commodity Trading Money Management System
Money management is important no matter what style of
commodity trading. Risking less than 10% on any one
trade is the key to survival. Less than 5% is even
better if you have the account equity. I'm not saying
that futures contracts are better than commodity
options. I'm saying buying way out-of the-money, far out
in time commodity futures options can make us lazy in
our market entries and risk analysis. The cry is, "I
have plenty of TIME!!... I'm not worried." But that
expensive time passes quickly. Just look at the monthly
chart of your favorite commodity (or stock) and notice
how often the market will chop nowhere for six months at
a time.
Commodity Market Trading
Now that you’re looking at Day Trading, Forex or
Currencies market trading as a business, you need to
learn some valuable statistics about your trading system
so you can improve its performance. You would use a Day
Trading, Forex or Currencies back testing method system.
You can’t improve your system unless you have something
to measure it against. How could you expect to improve
your market trading unless you knew what it was you were
looking to improve? You can discover these measurements
and other valuable information about your market trading
system.
There are two ways that you can use a Day Trading, Forex
or Currencies back testing plan to back test a system.
You can do it manually, which can be a drawn out and
labor intensive process, or you can do it with the aid
of some software packages. Unfortunately, I recommend
you do it by hand when you first start out. You’ll get a
much better feel for your market trading system, and
you’ll understand exactly how using a Day Trading, Forex
or Currencies back testing plan works in all its
intricacies.
Commodity Trading System
Now, you know that this commodity trading system has a
win to loss ratio of six to four. Would you have the
confidence to open another trade if your system brought
up another buy signal after getting 11 trades wrong?
Unless you use Day Trading, Forex or Currencies back
testing plan to back test your system, I doubt that your
confidence level will remain high. That commodity
trading system may be a fantastic profitable system.
However, since you didn`t use your Day Trading, Forex or
Currencies back testing plan to back test it, you don`t
know that historically this commodity trading system
received up to 13 losses in a row, but was still
profitable.
Commodity Market Trade
This means once you begin commodity trading the odds of
getting losses early in the game are much higher than
getting a winning commodity trade. This is particularly
true when you consider that many successful commodity
trading systems run on a 40/60 win to loss ratio.
However, you will never know the intricacies of your
commodity trading system unless you use a Day Trading,
Forex or Currencies back testing plan and back test it.
Using a Day Trading, Forex or Currencies back testing
plan, will help you to understand what works and what
doesn`t. It will give you the statistics to gauge the
effectiveness of your commodity trades. It fills in your
scorecard, and allows you to make improvements. But, you
shouldn’t simply believe everything I’ve told you.
Instead, you need to prove it to yourself by using some
Day Trading, Forex or Currencies back testing plans and
back test your commodity trading system.
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