Psychology of Commodity Trading Market
The reason why 90% of commodity traders lose can be summed up with 2 words:
Commodity Trading Psychology
Many people fail on the commodity psychology front and only a few take the time to transform their mindset. The reason why most people make losses is not that they cannot beat the commodity market, but because they do not have the right mindset. Commodity Trading psychology is all about transforming your mindset.
In Commodities, you must first master your method and then put in many hours of learning how the commodity market works.
The commodities trading market is too complex and there are many factors that have a huge impact on the daily fluctuation of commodities prices. Commodities traders should understand how the online commodity market works through studying commodity trend characteristics and also how these fluctuations take place.
Psychology and Emotions
When it comes to the commodity market, winning is a matter of the mind. Studying the psychology of the commodity market takes into account what influences others - including the mass psychology of the people that trade commodities trading on a daily basis. Anything involving winning or losing large sums of money becomes emotionally charged. Winning depends on knowing your own mind and also understanding how mass psychology moves the commodities prices.
In most cases when traders invest in a commodity instrument, they invest more than just money - they make an emotional investment. This is where most go wrong; being right becomes more important than making money. When the transaction goes wrong since they have already made an emotional investment they let their decisions to be ruled by their emotions and they hold on to their losing transactions in the hope that it will bounce back. Unfortunately their losses become greater and they find it even more difficult to close their commodities trade orders.
Even when traders make money and let their emotions get in the way, they either become greedy or over-trade.
Commodity Trading psychology will form a good foundation for profitably - it is about learning how to keep emotions out of the picture, & not to letting these emotions control your commodity transaction decisions - trader behavior changes very little with time, as humans will always make the same mistakes over and over again.
You can learn how to control the 3 most dangerous emotions that tend to cloud judgment & cost you profits. These 3 emotions include:
- Greed
- Fear
- Hope
Six Tips For Transforming Your Mindset
1. Define your goal.
There are many important Commodity Trading questions that you need to answer before jumping into the commodities trading market. Creating and defining agoal will give you a start point to your success.
2. Keep it simple.
Some people use more than 5 indicators on one chart analyze & to inform them of their next move with no success or even breaking even. The thing is that more indicators don't equal more accuracy.
The Three most powerful tools to use are:
- Candles (buyer & sellers behavior),
- Commodities Price action (such as support & resistances), and
- Commodities Trend-line (up, sideways or down).
3. Don't get emotional.
If you're attaching emotions to your commodities trades because there is real cash involved you need to change your mindset & start following your plan. If you are a beginner trader with no previous experience always begin with training and learn until you begin making profits on you Commodity demo account before investing your capital.
4. Nothing wrong with breaking even.
Not all your trades are going to be winners. It is better to break even than to lose. If you know that a transaction has turned against you do not start praying for a miracle hoping for the commodities price commodity trend to reverse instead cut your loss and move on. There are endless profitable opportunities.
5. Speculation is your worst enemy.
Don't speculate on where a commodity instrument maybe heading. Always use your commodities charts and your plan and study the commodity trend before opening a transaction. The commodity trend is your friend, so make good use of it by following the commodities price charts.
6. Do not allow your winning orders to turn against you.
If you have an open winning transaction at hand do not allow it to turn against you. It is better to place a stop 5 pips above the entry opening point and break even/or win little than to let it turn into a loss.
For how to utilize these tips look at the Commodity Trading plan tutorial: the section about this is shown below.
Trading Psychology Principles Section on Commodity Trading Plan
