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Dealing with Losses in Commodity Trading

InvestorEducation / Commodities Trading Aug 02, 2009 - 08:38 AM GMT

By: Andrew_Abraham

InvestorEducation

For any of those contemplating investing in the commodity markets, they need to be very aware that losses are part of the game. As Ed Seykota has taught so many commodity and forex traders… losses are like breathing. They can not be avoided. If you are not having losses..either you are not trading.. or you are risking way too little. There is no way around it!


The Fact of life is when you are trend following, you will have losses… If you think you are going to prevent them, don’t even think about trading the commodity markets. You can not make money if you are not prepared to lose.

What is most important to realize that even the percentage of winners does not even matter. Losses must be kept to a minimum and profits…lets say… let them run as much as they want without any limitation. This is the key…not percentages of winners. Let your profits run…

Many equivalent commodity trading to poker. What is ironic in Poker is that one who wins the most number of times is not the one who wins the most amount of money. One of the biggest single reasons beginning commodity traders have poor performance is they seek to be rewarded that they were right. They do not let their profits run. They take short profits. Professionals don’t care and know that eventually a big winner is coming. Their goal is to make themselves available for that trade. Lots of small losses do not matter.

The goal of any successful commodity trading advisor is to achieve risk adjusted returns. The key is to be constantly aware of how much risk must be placed in order to generate returns. Realize that anything can happen. Think of what can go wrong. Put your stops in the market immediately. Keep to your plan. Make sure you have the discipline to follow your plan. The commodity and forex markets are full of risks, even risks you never thought of. This is the reason you need to have a well thought out plan…and most importantly the discipline and patience to let the plan work.

Andrew Abraham
www.myinvestorsplace.com

Andrew Abraham has been in the financial arena since 1990. He is a commodity trading ddvisor and co manager of a Commodity Pool. Since 1993 Andrew has been a proponent of quantitative mechanical trading programs. Andrew's major concern is not only total return on investment but rather the amount of risk that one would have to tolerate in order to achieve returns He focuses on developing quant models that encompass strict risk adherence and correlation. He has been a speaker at conferences as well as an author of numerous articles. Andrew has spent years researching ideas that have the potential to outperform indices as well as maintain fewer draw downs.

Visit Angus Jackson Partners (http://www.angusjacksonpartners.com) Contact: A.Abraham@AngusJackson.com (mailto:A.Abraham@AngusJackson.com)

© 2009 Copyright Andrew Abraham - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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