How does Commodity Futures Day Trading Work

Being armed with the knowledge of how day trading in commodities futures works can not only help one profit when day trading in futures, but can save one the embarrassment of explaining quick and sometimes, substantial, losses to family and friends. While commodities futures day trading sounds like an easy way to get-rich-quick, with little effort other than sitting in front of a computer, establishing a commodities future trading account, and raking in profits all day, there is much more involved.

Without being educated in the required skills, patience, discipline, strategies and trading personalities, the novice is apt to incur quick and potentially substantial losses when diving right into the area of futures trading without understanding the full scope of how day trading in commodities futures works.

Those who take the time to become educated in the process of exactly how commodities futures day trading works, to learn strategies, develop the discipline and other skills necessary for success in the market of futures trading can actually make a lucrative profit from commodities futures day trading. But there is also the skill of controlling emotions when investing in commodities futures day trading.

The lack of emotional control has been the downfall of many in this potentially lucrative market. When emotions over things like short-term losses get in the way, a trader’s judgment may be clouded, leading to poor decisions in the rapid pace of commodities futures day trading. By maintaining confidence and optimism, one is more likely to be successful when investing in commodities futures day trading.

While the basic concept of day trading in futures follows the same premise as other day trading, in that it involves the buying and selling of futures all in the same day, and that the goal is till making a profit the same day with no overnight holds, day trading in commodities futures is still somewhat different than other day trading. Instead of day trading in financial instruments, the commodity futures day trader is trading in commodities such as paper, oil and food products. In trading commodities, there is no differentiation in specific product lines or brand names. So a commodity futures day trader may be trading in “corn” or “gold,” rather than a specific company.

Commodity day trading is considered gambling by some investors. Indeed, day trading in commodities can result in the trader incurring not only substantial gains, but substantial losses during the course of the trading day. But due to the very nature of day trading in commodity futures, one can often get out very quickly without incurring substantial losses.

Some commodity futures day traders may make one or two trades per day, while others may sell within just a few minutes after buying or selling commodity futures in large volumes, and continue making such trades all throughout the day. This style is called “scalping.” The “momentum trader,” on the other hand, buys commodity futures in smaller volumes, is more likely to hold onto the commodity futures for a longer period of time throughout the day before trading, and is more likely to employ methods of technical analysis and determining an appropriate and profitable entry and exit point.

The market of commodity futures day trading can be disastrous for the undisciplined, overly emotional, impatient trader. But the commodity futures day trader who is willing to take the time to learn and develop the techniques, skills and strategy as well as have the patience for constantly monitoring the market throughout the course of the trading day, and the styles necessary for successful commodity futures day trading can make a very lucrative living at commodity futures day trading.