Trading commodities for a living is a dream for many aspiring traders, but this dream can only be realized by a very few people. Although it is a challenging process, there are many things you can and should do to make this venture profitable and sustainable.
Available Capital
Do you have enough money to trade and earn a living? Some aspiring new traders believe they can start trading commodities with $10,000 and earn enough money each month to live on. While this might be possible, it is unlikely. Trust me when I say that this will not work.
To trade for a living, you must have enough saved capital to live off for at least a year. You will also need a sufficiently funded commodities account to be able to generate enough profits each year. If you want to earn $50,000 a year, you must have an account worth $250,000. If you can achieve a 20 percent return each year, you will make $50,000.
Many new commodity traders believe they can easily achieve 100 percent returns each year, but this is unrealistic. Certainly, you can achieve such returns in one year of commodity trading, but you may take on excessive risks and put your trading career in jeopardy. Think of it as a business, not a trip to Las Vegas. Always live to trade another day.
Trading Plan
It is essential to have a reliable trading plan if you expect to make a living from trading commodities. You should have some success and a track record of profitability in trading before you start doing it full-time. Your trading plan should be well-written regarding trading methods and risk controls. This is your business plan that will guide you through daily operations. Don’t ignore or rush through the trading plan.
Don’t Trade to Pay Rent
The worst thing a trader can do is put themselves in a position where they must earn enough money each month to pay rent and groceries. This is a dangerous situation that puts your back against the wall. It will cause you to face tremendous pressure and make trading significantly more difficult.
We don’t make good decisions when we are under extreme pressure. It is almost a guaranteed recipe for disaster. I have seen some traders succeed for a time, but you will always experience an inevitable downturn that will bring you down. Often, a losing month causes traders to take additional risks in the following month, putting the account at risk. This is when collapses happen and accounts are wiped out.
Making It Work
People who make a living trading commodities take it very seriously. They are prepared with a researched and tested trading plan. They follow their plan like a robot (most of the time) and do not take excessive risks. It is tempting to bet on an excellent trading opportunity, but it is not worth the risk. Not every trade works, regardless of how good it is.
Most people who try trading commodities fail. Do not expect this to be easy. It is wise to trade part-time at first and become a profitable trader for at least six months before trying to become a full-time trader. The learning curve usually takes one to two years before most traders can show consistent profits. Remember, ensure you have enough funds for trading and living expenses and treat this venture as a business.
Source:
https://www.thebalancemoney.com/is-it-possible-to-trade-commodities-for-a-living-809214
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