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A Quick Guide to Improving Your Trading Strategy

Commodity Trading

Strategy is everything when it comes to trading, a little improvement never hurts. That’s why its so important to constantly be refining your strategy. Whether you’re a novice trader on Robinhood or an experienced player using a tailored commodity trading platform, understanding and adjusting your approach to trading is vital. This quick write-up will hopefully offer some advice on how you can do just that, ultimately increasing your potential as a trader.

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Grasping Market Dynamics

First and foremost, you need to have a good grasp of market dynamics. This forms the backbone of any successful trading strategy. The financial markets are influenced by a range of factors, from economic indicators to political events and general market sentiment. A subscription to a news service or three can go a long way in keeping you up-to-date and alerting you to changing market dynamics.

To improve your understanding of how the market works, take time to study the economic calendar and map out the potential impact of different events on your held assets. How might an oil spill affect your holdings? How will GGL signing the PNG agreement affect the market in the days to come? These are questions you need to be asking yourself as a trader.

Analyzing Past Trades Both Good and Bad

Perhaps the best thing you can do as a trader is take a look at and study your previous trades, and not just the winners either. Your losses are almost more valuable than your wins, as you may eventually be able to identify where you went wrong and prevent it in the future. Remember, to recover from a 50% loss, you need a 100% gain. It’s easier to keep the capital you currently have than try to earn it back in other positions.

Use trading journals or software to help track your performance and identify patterns in your trading behavior. Such valuable introspection allows you to pinpoint your mistakes as well as highlight your strengths. You’ll soon be able to see what strategies are working well and which ones are doing so hot. Just remember, the goal isn’t to dwell on your losses and what could have been but rather to prepare you to turn those thoughts into a reality.

Understanding EMA Indicators

An EMA indicator is an often overlooked part of trading but can provide valuable insight into what a commodity or stock is about to do. The exponential moving average is an advanced type of moving average that highlights recent price information. EMA is, therefore, more susceptible to recent price movements, making it useful for traders interested in short-term trends. EMA is just one of the many advanced techniques traders can keep in their tool kit to become better traders.

Risk Management

Trading is essentially all about managing risk and how you do it. No matter how good a trader you are, without proper risk management, a single trade can decimate your portfolio. New traders often want to learn how to make profitable trades but fail to recognize just how crucial risk management is if you intend to keep those profits.

Stop-loss orders are perhaps the easiest form of risk management, as you can limit potential losses by setting one. A stop-less is essentially a safety net where if the price of a stock or commodity falls below a certain amount, you will immediately exit your position and avoid heavier losses.

Another thing to keep in mind is how much capital you are risking per trade. Most successful traders risk less than 1% of their total trading capital in a trade. By diversifying your portfolio across different commodities in different markets, you shield yourself from the poor performance of a single sector or company.

Using Paper Trade Accounts

Paper trading is the way to go if you have a risky strategy you’d like to try or are new to the world of trading. Paper trade accounts essentially give you monopoly money to play and trade with. There’s no value to paper trade accounts, and no deposits are necessary. It’s simply a way to hone your skills and see if you’re on the right track without risking real capital. The market conditions are real and perfectly mimic our own exchanges like the NYSE and other global markets.

Paper trading is a great opportunity for experimenting with different techniques, entry and exit strategies, and seeing how your methods perform in various market scenarios. This serves two-fold: 1. It tells you if your strategy works, and 2. it helps you build confidence. You’ll get used to seeing numbers in red or strategies going sideways instead of up. You’ll learn that the market can be fickle and behave the exact opposite of what you thought. Paper trading is the single most valuable tool in your arsenal if you’re a new trader.

Image by vectorjuice on Freepik

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