Dear all,
Whether it is equity or commodities, one has to trade carefully in futures. These future's product can make or break your investments. As of now we have only futures available in commodities with out any hedges.
I dont want to comment on number of commodities or liquidity etc as this is a growing market.
But I would suggest... one has adopt TRADE approach while investing in commodities. Trade approach means---- Before you invest your margin (which is otherwise your capital) one has to be clear about the loss that he can bear. For example, If i am invetsing 1 lakh, i should be clear about my loss such as 50000 or 30000 etc. Then, devide your maximum loss with maximum loss that you want to afford per trade. Ex. I am ready to take a maximum loss of 3000 per trade. That means I should take 10 trades. Assuming all 10 trades hit stop loss then I will loose, Rs.30000/-. If 50% trades hits your target of Rs.4000 to 5000/- per trade, then you will be in profits.
Unfortunately, Most of the positional traders ( Those who take one trade and wait for the market to come in his favour) have suffered huge losses. (loosing entire capital and going to debits)
I can write it on paper that this trade call approach will yeild profits.
Do not over expose yourself. What should I call, if anyone is coming to Commodity Markets with a margin of 5000 to 10000 margins and expecting profits of 5000 to 10000/- ... To my human sense it is called as betting or gambling....I dont call it as speculation as speculation is informed trading with sufficient investment margins. Unfortunately, small brokers are allowing investors (?) to over exposures. I see someone writing loosing of 20% in a single day. How can one loose 20% in a day when the average volatility is 2 to 3%. That means he must have taken 10 lots of Crude oil with a margin of 12000 to 15000...Crazy man.....Better these kind of people should buy lottery tickets rather than speculation.
My suggestions>
1. Minimum investable amount is Rs.50000/- ( for Agri Commodities), Rs.100000 ( for metals. - Gold 100g and Silver 5Kg, and Copper) and Rs.200000 (For 1 kg Gold and 30 kg Silver and Zinc)
2. Maximum affordable Loss (Stop Loss) per trade in Agri is- Rs.2500 to 3000/- in Metals Maximum Loss should be Rs.4000 to 5000
3. At any point of time, do not try to have more than one trade. Many people tell to diversify thier portfolio. With the above minimum investment it is not advisable to have more than one position
4. The moment you take position, please enter stop loss. A delay of 5 or 10 min would show you hell... ( We have experienced it during Chana Craashhhh and Silver Crash )
5. Always expect annualized return. If you dont have patience to annulize your returns and expecting weekly or monthly returns, please take out your money....As you are bound to loose your capital
6. If you are systematic enough with above points,... you can expect a return of 5% per month with a risk of your pre-committed loss ( i.e Maximum loss.... assuming 10 trades hitting stop losses thus loosing 30000 to 40000)
7. If you want to be conservative then keep your buy orders at day's low level and Short orders at Day's high levels. This will substantially reduce your stop losses. But only problem, is your trade might or might not get executed. You have to wait for your turn next day.
Final suggestion: MARKETS ARE THERE FOR EVER....BUT YOUR MONEY (INVESTMENT) MIGHT NOT.... ALWAYS TRADE WITH STOP LOSSES
Happy Trading
Nanabala
9986039019
Bangalore
