Greed could possibly be the greatest cause for commodity traders losing money. The enormous leverage in trading commodity futures allows traders to make very quick and large profits, but the same principle applies to losses. Just because you double your money in a couple days on a commodity trade does not mean you should expect it everyday. Therefore, it is very important to set realistic expectations when you are managing your commodities portfolio.
Respectable Returns When Trading Commodities
Most professional commodity traders feel that returns greater that 25 percent in a year are very good. Yet, novice traders will trade like they have to make that much money everyday. They will over-leverage their commodity accounts by trading too many positions at one time and their account equity will swing erratically from day to day. Their accounts will eventually get blown out from this type of trading. Greed in trading rarely leads to long-term profitability.
Remember that you will have losing days and winning days. Even if you are trying to make 100 percent returns in a year – you have all year to do it! Trying to get it all in one month will often lead to destruction of an account. You are better off having consistent returns of 5 percent each month than being up or down 20 – 50 percent every month. It will keep you much more disciplined and it will be a much more relaxing experience.
