Friday, July 13, 2007

Market functions like fire. A trader should be properly equipped with modern tools before entering into market arena. In all probabilities, a trader not possessing proper skill set to play with the fire will burn his fingers. The market will throw him out of the arena, after squeezing him mercilessly.

On the other hand, if a trader sharpens his skill-sets to fight the battle, he can tame the fire and use it to his advantage. Trading with proper strategies, not only results into wealth creation for the trader, but also helps the market to grow on sustained basis.

In absence of successful trading skills, there is widespread value erosion for most of the participants, which results into more number of people deserting the market after operating for few months, which damages the market sustenance in the long run.

Hence, in order to ensure their own long term survival, the markets are duty-bound to impart knowledge among participants, caution them against possible pitfalls and help them mature in their trading skills.

However, in order to sustain the pace of growth in the years to come, it is important to introspect the nature of trades usually done by the traders, to identify deficiencies in such strategies leading to loss of capital and to suggest possible solutions to such matters.

Each underlying commodity has a different type of volatility. Volatility can be defined as the range within which the price of a commodity generally moves during a given period of time.
When we say average volatility, we should not consider the extreme volatility exhibited by different commodities at certain points of time due to certain special events.

The difference in volatility in different commodities is a function of:
• Historical price behavior.
• Liquidity of the commodity - volatility tends to be lower if a commodity is high liquid and impact cost of putting in a position is lower while it would be higher if the liquidity is low.
So these were some of the points which will help us in our trading.

I hope there suggestions are gonna useful for us in long run

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