My golden Rules for trading Crude oil and Natural gas

Hello everyone, I am an Indian Trader who trades particularly in MCX Crude Oil and Natural Gas. The traders which have dealt with these commodities know full well that these are the most volatile and troublesome of them all. It may seem at times that these commodities are fully operator driven and do not follow any established trends. Here are some of the rules which I had formed for myself after losing repeatedly, These rules have since helped me to stay in positive territory :-

(1) Never put your entire capital in any single trade and do not go on averaging.

(2) Do not ignore your stoploss but a little flexibility is required as these commodities tend to swing here and there. But never hesitate to book loss as it may prevent disaster. 

(3) Do not revenge trade. If you have encountered loss. Try again the next day. Do not go on switching trades and piling up the losses.

(4) Try to trade only in futures if possible.

(5) If trading in options , do not go for goose chase  and never buy options at the starting of the contract and do not carry your options to the end of the contract either. Trade in Between when the premium seems to be reasonable.

(6) Do not go for out of money options , go for deep in money options that have reasonable liquidity.

(7) Do not go on averaging falling options , it is very unlikely that the options will reverse.

(8) Do not buy options at the starting time of the MCX as premiums are bound to decay.

(9) Try to cover your positions before opening of the US markets as the market may change directions very rapidly.

(10) Do not keep positions for the next day as you may run the risk of your capital getting wiped unless it is highly expected that the trade may go in your direction. If in profit book at least 60% and if in loss take some loss as per your capacity as it is not in best interest to carry positions in these commodities. Better to sleep well than to become a night owl.

(11) A definite target of profit should be there and one must get out of the market after achieving the same on daily basis.

(12) There are some days where volatility is very high, do not trade on these days .If already in loss , take your loss and leave.

(13) Do not go for multiple trades , if the daily target has been achieved. These commodities can make a 180 turn in blink of an eye.

(14) If market suddenly start moving in direction opposite to your trade . Book profit and wait and do not show eagerness to take new trade unless the direction has been established.

(15) Look for the days with clear direction to maximise your profit. The days when these commodities increase or decrease more than 2.5 % with volume . Never take an stance opposite to a market direction as reversal chances in these commodities are quite less and it is more likely to go ahead with the direction it is moving at.

(16) Do not trust the market direction before opening of the US market. The trend may change completely.

(17) Do not trade on news or the inventory data. Look for technical ideas and the price action. These commodities hardly respect any market data in short term. Retail traders hardly wait for their options from getting doubled when they see it has already halved.

(18) Use only small money for option trading.

(19) Do not use up all your capital for futures always buy in baskets and save some money for averaging if one feels sure of the market movement.

(20) There are times when premium decay of options are quite visible. Just close your trade and wait.

(21) It is either small profit or big loss with these commodities . Book profit regularly. But if already in profit , keep a stoploss and hang on but do not take the trade to next day.

(23)Book your trades before inventory time of these commodities on wednesday for crude oil and Thursday for natural gas. No one can predict the movement after the inventory time. Fundamental/charts all come later. The inventory may wipe your capital all at once.

(24) Always keep an eye on the economic calendar and the data due for week as their impact is quite sudden. The market may go in opposite direction after the data but it does change its direction eventually. better to avoid the conflict and wait for market to stabilise.

(25) Not essential to trade every day. More involvement means more risk. Risk management is essential.

(26)Crude changes its direction in intraday more frequently than natural gas which most of the time goes on either increasing or decreasing. No hope trade in Natural gas.

(27) Always check historical prices as they may show trends in these commodities.

(28) Trade with fixed capital and pull ou your profits repeatedly. Do not go on increasing your capital with the profits you make. As one unexpected loss will ruin your entire profits and take capital with it.

PLEASE REMEMBER THIS- LOSING IS A HABIT, SO ITS BETTER TO MAKE SMALL PROFIT THAN TO LOSE BIG.