What are some basic rules and strategies for trading the commodity markets?
1. Commodity positions are meant to be traded in and out. Buy and hold does not work, especially with options
2. Take Losses and Regroup (TLR).
3. Take Profits and Relax (TPR).
4. The market will determine if you are RIGHT or WRONG. If you are right the market will reflect it very quickly. If you are wrong the market will reflect it very quickly, so GET OUT, reposition, or use longer term option positions to limit losses.
5. If you are not confident about a market’s short term direction, but are comfortable with the market’s long term direction USE OPTIONS.
6. Cover some future trades with options to reduce risk.
7. Exit all losing futures positions at end of day or sooner. NEVER EVER hold over a long weekend!
8. Never place a futures trade without first considering the worst case scenario, and determining that you can handle it. WHAT CAN GO WRONG, MIGHT GO WRONG!