How to Trade Commodities Like a Real Professional

The major leagues of trading

When you trade commodities, or futures if you will, you are in the major leagues of trading. It can be fast moving, with incredible leverage. Fortunes are made sometimes in short order, but always remember, it is a double-edged sword. About 90% of all commodity traders ultimately lose, and many of them lose in a quick manner. It is the same 10% or so that consistently win, year after year. In this article, I will share with you, some of what it takes to successfully trade commodities. If you can make it into the winner's circle, you could become wealthy in the process.

Develop sound trading principles

To be successful in the world of trading, you simply must implement proper trading principles. You need to be able to make money in an up-trending, down-trending, or a non-trending market. This is achieved by utilizing proper technical analysis. As an example, always work an advancing market from the long side. Once the market starts moving in your favor, you can add to your position.

Always practice solid money management by placing a strategic stop-loss right after you enter the market. Then as the market goes in your favor, you can trail your stop-losses to ensure profits. At this point, just let the market run in your favor until the stop-loss is hit automatically. The golden rule of trading is to cut your losses short, and let your profits run. When you trade commodities, stocks, or any other venue, always follow the golden rule.

Conduct analysis and take action at the right time

It is of great importance that you properly analyze a market before entering into a position. I always check the long, medium, and short-term trends to get a perspective of where a market is technically. I also look for certain chart patterns I know have a high success rate. It is important to know, and usually follow seasonal tendencies. A secondary indicator I watch is cash basis. This is the difference between the spot cash price and the futures contract price. It simply tells you how much the cash people want a certain commodity you are buying or selling the futures contract for. After properly analyzing a market, have patience and only take a position when everything lines up in your favor.

Important traits to help you succeed

When you trade commodities, or any other trading venue, you need to have certain essential traits, or characteristics. The following is a few of the more important ones. Self reliance is critical to your overall success. You need to learn what it takes to be a winner in the world of trading. Then you must think for yourself, and not rely on others. Always follow your own convictions. Judgement is absolutely essential. You must be able to make sound trading decisions under any circumstances. Courage is a must, but at the same time, do not be reckless. Last, but certainly not least, you simply must have the ability to adapt as market conditions change. These are a few of the traits necessary to trade commodities like a pro.

Tracing The History of Crude Oil

It takes maximum effort on our part now, to realise what wonderful qualities petroleum possesses. It is a form of raw liquid oil that is highly inflammable and is pumped right out of the ground. A few years back the only oil available was what was extracted from plant crops or animal fats. Coal was used to produce gas. The rich source of mineral oil, pulsing deep in the earth was as of yet, undiscovered.

Seeps of natural crude oil are commonly found on the earth. However, the oil seeping from this is generally highly degraded and looks like tar. This oil was locally used as a crude medicine. In 1859, drillers learned to unlock the oil lying deep in the wells. Its qualities began to be discovered. In the next decade this discovery totally changed the course of the civilization on earth. At the same time natural gas also gained recognition.

Petroleum is formed from the fossils of living things over a large period of time. Producing petroleum is a detailed process which involves skills and techniques. Oil from the it reserves has to be pumped out at a specific rate which is determined by the quality of the reservoir and the viscosity of the oil. Extracting oil has to be done cautiously. Negligence in this regard can lead to clogging or collapsing the pores. This renders the oil reservoirs inaccessible from the oil wells. Pumping too fast, too slow or even disrupting pumping can cause major damage to the oil field. More wells need to be drilled to tap the full potential of the oil reserves. However, this aspect raises the production costs.

Drilling horizontal and curved wells is a widely practised method to increase production. Another method used is fracturing the oil reservoir and pumping fluids and sand into it at high pressure.

Sweet crude is crude which has a little sulphur present in it. It is also called as sour crude if the presence of sulphur is high. The reason for this is that crude with little sulphur can be easily refined with minimum effort.

As the oil industry is booming more and more people are making investments in oil. Oil investments offer people the chance to be a part of this booming industry. As it is a limited resource oil prices will continue to soar over the next few decades. Even a small oil investment today may return unlimited profits in the future.