Commodity trading is a different kind of business. The market is not like your regular currency market. The price movement of the financial instrument exhibits a different nature when there is the news released. The impact of news can stay on the commodity market for more than a month or even a year. The smart investors in Singapore must have guessed that commodity trading requires strong skills in fundamental analysis. Fundamental analysis is essential but it, not the only factor that you need to rely on to become a professional commodity trader. There are some other factors that you need to consider to improve your skills and boost up confidence level. Let’s explore the important elements of this market.
We have already said, fundamental factors are one of the most essential elements for this industry. Ignoring major or minor news can cause big losses. People who want to earn big amount of money and change their life must trade like the elite investors at Saxo. They always analyze the key news and asses it with the technical data. They never rely on news factors solely. They know the importance of three major forms of market analysis. To become good at trading, you must master technical and fundamental analysis. Study the behavior of the market in the event of major news releases. This should give you a clear idea of how the industry is working and it should improve your skills over the period.
Study the price dynamics
The elite traders know the different nature of the commodity market. But still, they prefer commodities trading since they know it can provide them an easy path for long term investment. If you study the dynamics in the price, you should notice the lower time frame support and resistance level are not important. These are the levels that cause the rookies to lose money. On the contrary, if you study the daily or the weekly chart, you should notice the price is respecting the important levels. It will provide you a trending riding entry and you can significantly boost the profit factor without worrying too much about the results.
The risk to reward ratio
Being a professional trader, it is super important that you learn about the importance of risk to reward ratio. Without analyzing the risk to reward ratio in the trades, you won’t be able to earn enough money to support your family. People who are trying to boost their confidence level are always earning more since they know the exact way to take the trades is to follow strategic steps. Unless you learn this technique by heart, it will be a big challenge. The minimum risk to reward ratio must be 1:5. There is nothing to surprise by such a classic risk to reward ratio. You are not investing in a shorter time frame. The trades will be taken in the higher time frame and you are supposed to ride the trend. So getting such a reward is very normal when you deal with the commodity market.
The risk factors
Just because commodity trading provides long term investment opportunity, doesn’t indicate you will win most of the time. You can have losing months. But you need to know the trading strategy that you are using is capable of winning more than 70% of the time. In that case, you can risk 2% of the account balance and manage to earn money even after losing 30% of the time. To process the trade in a stress-free environment, you can reduce the risk to 1%. But when you trade with such low risk, don’t be concern about the profit factor. No one knows about the results of each trade. So, expect the worst, and be happy if you make money from a certain trade.