The Psychology of Commodity Trading


Posted by Kevin Kerr on Mar 24th, 2007

If you're going to trade commodities profitably, it's vital that you understand the inner workings and psychology of commodity trading and?the market participants, as well as what actually goes on in the pits. By having an understanding of what goes on in the pits and with the floor brokers, as well as with your own broker on the trading desk, you'll be able to empathize with them and know when to ask for more and when to ask for less. Knowing what your brokers can do for you and what is beyond their power makes them appreciate you and consider you an ally. It puts you on their favorite clients list, [which is] not a bad place to be. It's always a good idea to have your broker like you because he or she will look after you better. While any ethical broker should, and generally does, do his/her best for each client, chances are that they would tend to go above and beyond what's expected of them if you take the time to establish a rapport.
You don't have to move in together, but just show that you're making an effort to understand what they do and how they do it. The best brokers will call you when they see an opportunity or, in other cases, a problem, with your account. They will be quicker to do this if they like you. They can tell you what trades are simply not a good idea, help you understand terminology and even decipher the various industry reports, and a lot more. Even better, brokers like clients who have a basic understanding and try to learn the workings of the market. When you have that understanding you have an instant edge over the vast majority of novice commodities traders.
Kevin Kerr
for The Daily Reckoning Australia

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