To start with I would first say that there is no secret recipe for success in trading but through my experience I would also add that this is not impossible. I feel below are the key traits or attributes one must have to be successful in commodity trading.
- Patience is the key : In any kind of trading or even investing patience is the key. If you know you have taken the right position at more or less the right price you need to have patience. Specially when taking contrarian calls. No trend will remain forever. If you plan your positions ,trade small lots and have patience you will get a profitable exit.
- Learning through mistakes : I guess this one applies to everything in life and very much applicable for trading as well. Sometimes we tend to over trade, hold on to loss making trades even after knowing that the current trend is against us and we are losing our margin money. We decide to take a trade for quick bucks and get stuck by not putting stop losses. I have personally made all these mistakes and I am still learning.
- Be informed : Commodities are largely demand and supply driven and we should be informed about these changes. We should track the inventory data and plan our positions accordingly. For ex: Natural gas is a highly volatile commodity and weekly inventory data is released every thursday . You can check it on United States Natural Gas Storage and avoid taking bigger positions around that time.
- Know your limits : Knowing your limits (margin available) is very important. Do not use all your trading limit to take intraday positions. Specially , so not average by adding on to loss making positions in intraday trades. Just like a penny saved is a penny earned , A loss avoided is equal to profit earned !! Believe me . Those who have made this mistake and lost their trading capital would definitely agree to this at least partially.
- Learn technical analysis : Over the years , I have seen that commodities largely move on technical basis. I am not saving that the direction of trend will not be driven on fundamental factors but at least on hourly basis (which is of much interest for traders) the commodities do move on technicals.
- Avoid greed : Always remember that there would be literally infinite opportunities in the future and no opportunity is the ultimate opportunity where you will go all in and become millionaire overnight. Do not allow greed or anxiety to drive you into taking an positions. Plan and then execute your orders. Believe me losing an opportunity is better than losing your trading capital.