My name in Andrew Abraham. I have been investing in commodities and managed futures since 1994. I adhere to the philosophy of trend following.
Trend following stresses a disciplined approach to commodity/ futures trading. Successful trend following and commodity futures investing requires patience, discipline and actively managing the risk. What sets me apart from other traders is that I am not only concerned about the return on investment but how much risk I will have to tolerate to achieve my goals.
Calculating risk in Commodity Trading
In my opinion…everything boils down to risk… not how much you can make..but how much you can lose in commodity trading. More so when we put on a trade..we think to ourselves mentally…how much is this going to cost me to see if the trade will work. The sad thing is that most people believe because they put on a trade…it has to work…many experienced commodity trading advisors think the opposite…We always think in terms of risk per trade…risk per sector…and open trade equity risk.. If you trade commodities yourself you need to think in these terms…or if you allocate to a commodity trading advisor you need to get good answers to these questions.
In conjunction with the idea of calculating the risk…we navigate our way through the markets. We chart our course..Similar to the idea of a sailor charting his course through the oceans. When sailors chart their course and calculate their position they reduce their risks and the inherent dangers of the seas. The idea of navigating our way through the markets we have researched…tested and evolved our methodology. Our course has been plotted.. and we attempt to mitigate the draw downs and volatility. As the mariner hundred of years ago would use his sextant( to calculate his position and course) I would suggest any trader…or anyone allocating to any commodity trading advisor that each and EVERY day calculate your risk…in each trade…each sector and open trade equity. Adhering to this methodology you will always have a good idea of where you are in relation to where you want to go.
Nothing really ever changes… Things are as simple as you can make them…and not simpler. Never risk all your capital on one trade…( I do not allocate more than 5% to any other commodity trading advisor) and diversify…This might sound very academic…but I have seen countless traders get careless about risk & blow up their career.
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Andrew Abraham
A.Abraham@AngusJackson.com
www.AJpartnersinc.com
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money
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