What happened after the US and China Trade War?

WHAT IS THE US AND CHINA TRADE WAR?

The term ‘US and China Trade War’ has been applied to the actions of the United States of America by imposing 185 billion US dollars of tariffs on Chinese goods being imported into the USA.  It includes the retaliative action by China of imposing their own tariffs on USA-sourced goods imported into China.  This has been followed by a period of negotiations and adjustments to the tariffs which appears to still be ongoing.  All issues surrounding these matters can be considered to be under the banner of the ‘US and China Trade War’.

HOW DID IT HAPPEN?

As China had record growth of its economy over the last 2 decades, there developed a huge trade surplus with the United States of America.  China was selling the Americans many more times the value of goods than it was buying from them.  This situation was the cause of much grievance on the part of the Americans, felt that China was behaving in an unfair manner.

It can be said that President Trump of the United States of America made the first move that initiated this ‘war’ when, in July 2018, he announced tariffs on 185 billion US dollars’ worth of tariffs on Chinese goods being imported into the United States of America.  This was not entirely unexpected as he had been threatening to do the same for many months before, as he believed China was acting unfairly in its trading practices.  Trump had expressed disapproval of the Chinese trade practices going back as far as his election campaign in 2016.  This decision of imposing tariffs was intended to protect jobs and businesses in the USA against the burgeoning competition coming from China, which many deem unfair.  The Chinese government took extreme offence to this, and retaliated by imposing tariffs of their own on USA-sourced goods entering China.  The net result was that rather than protect the markets it actually hurt businesses and workers in both countries.

WHAT HAPPENED NEXT?

Throughout the rest of 2018 China and the United States of America have been imposing what appear to be ‘tit-for-tat’ tariffs on each other’s goods.  Both countries incrementally kept adding more and more of each other’s commodities to the lists.  In between there were positive talks between the two counties and some reductions in tariffs on certain items, and even a temporary reprieve for a short while in the early days.  However both countries also filed complaints against each other to the World Trade Organisation, and tariffs continued to increase and incorporate an ever wider scope of commodities.  Further talks broke down in vain and nothing changed.

At the G20 Summit in Argentina, held in December 2018, the two countries made an agreement not to impose further tariffs for 90 days.  Subsequently China resume purchasing USA-grown soya beans which they were boycotting until this time.  China subsequently announced that it would ban all variants of fentanyl (a synthetic opioid) in concession to a demand made by the USA.

After the G20 summit in Japan, 2019, an agreement was reached for a ‘ceasefire’ whereby no more tariffs were to be applied by either side.  This effectively froze the situation in its present condition for the foreseeable future.  As it happens, it would only be a short time before Trump was threatening more tariffs.  By August 2019 China announced more tariffs would be put in place on another 75 billion US dollars’ worth of USA-sourced goods.  On 1^st September USA retaliated by going ahead with planned tariffs that had thought to have been previously put on hold.

On January 15^th 2020, both countries finally signed ‘Phase 1’ of a new trade deal which would begin an incremental roll-back on tariffs on both sides.  With Phase 1 now becoming a reality, it is yet to be seen whether or not the ‘trade war’ is coming to an end or whether something could cause it to flare up again.

WORLD FINANCIAL IMPACT OF THE CHINA AND US TRADE WAR

We have ascertained that the countries of Chin and the United States of America are greatly affected by this so called ‘trade war’.  But they are not the only countries to feel the effects.  Looking at the wider picture, the impact of this situation would be felt by almost everyone in any country who routinely relies on Chinese or USA-sourced finished products that contain components from both countries.  An example of this would be steel products made in the USA that would normally have used steel sourced from China.  The manufacturer of these products would have to make the choice of whether to continue with Chinese steel and meet the cost of the imposed tariffs, or source their steel from elsewhere.  In either scenario, the steel would be more expensive to buy than had been the case before the trade war.  The extra cost involved in buying the raw material would no doubt be reflected in the price of the finished product.  This would affect the final buyer regardless of which country they were in.  If the new, revised sale price of the product was deemed excessive by the customer base, they would stop buying the products which would therefore put the viability of the manufacturer’s business itself in jeopardy.   The same is true for any country that purchases products from China that have USA-sourced raw materials in them.  These would include soya beans and pork products.   On the other hand some countries stand to reap benefits if they can take the place of China in supplying raw materials to the USA.  President Trump has ordered USA businesses to look elsewhere for goods that they currently source from China.

CASH FLOW AFFECTED BY THE US AND CHINA TRADE WAR

Under the presidency of Donald Trump, the USA has witnessed almost a 90% decrease in cash flow coming in from China.  46.5 billion US dollars’ worth of investment from China in 2016 was down to just 5.4 billion dollars in 2018 and this continues to drop.  This is reflective of the state of the economic relationship between the two countries and the atmosphere of distrust on both sides.

What is Equity Trading in India?

The trading of a company’s equity begins when a company becomes publically listed.   This means that the company directors take the step of allowing the sales of stakes in the company to individuals and other companies.  These stakes are known as shares.  In return for the initial investment that the share-buyer puts into buying the shares, they are entitled to a share of the profits the company makes.  How much of the profit goes to each share-holder will depend on how many shares they hold, as each share held will be entitled to an equal share of profit.  The act of a company paying out shares of profit to shareholders is called paying dividends.  The better the company performs, and the more profit it generates, the higher the dividend payouts per share will become.  However the dividends can drop to zero if the company performs poorly.

Why Do Companies Want to be Publically Listed

There are several reasons why a company’s directors may decide to get the company publically listed.  It could be that they want to take the next big step into expanding their operations and need a big injection of funding to enable them to do that.  It could be that they want to become the biggest company in their sector and plan to make move ahead of their competitors or even buy-out their competitors.  It could even be possible that the company is in debt and the only way to settle debts and put it back on the road to recovery is to publically list it.

How to Buy Shares in a Company

Once a company becomes publically listed there are two ways for an individual to purchase shares.  The primary market is where shares are sold directly from the company to the individual.  This usually occurs shortly after the company becomes publically listed, and sometimes it does not take long for all the shares to be sold.  Shares are all sold for a fixed price which may be as low as Rs.10 per share.  Once all the shares have been sold on the primary market, the way to purchase them is on the secondary market.  This is where individuals (not the company itself) are able to buy and sell shares between themselves by using equity trading services in India.   In either case, the share-holder will need a demat account in which to hold the digital proofs of ownership of the shares.  In the past these were paper certificates that had to be carefully stored by the share-holder.  With the advent of modern technology, we no longer have the problem of protecting paper certificates as demat accounts can be entirely managed online.  To help set up your demat account, and get you on the road to trading you will find it easier to enlist the help of an equity trading broker in India.

What is Point of Buying and Selling Shares?

Holding good shares will generate ‘passive income’ that comes from the dividend payments.  Eventually it is hoped that the amount received in dividends exceeds the amount invested when buying the shares.  Indeed some people who hold a lot of very good shares actually rely on the dividends for the day-to-day living expenses and do not need to work.  The purpose of selling shares is also to make a profit.   Remember that shares are initially sold on the primary market for a fixed price.  However, if a company performs well, the value of those same shares can increase over time, as it reflects the price that other investors are willing to pay for those shares.   It is possible to profit by buying shares at a lower price and selling them for higher prices once the demand rises.  There are two sides to every coin, and the opposite side of this story is that share prices can also go down if companies perform badly or other factors impact on the market.  Investors often choose to sell shares which are performing poorly before the value gets too low, in an attempt to limit their losses. 

What is the best Equity Trading Company in India?

There is no definitive answer to the question of who is the best equity trading company in India.  It is not as if only one company does the best equity trading in India and the others do inferior trading.  That is not possible.  Trading itself is either done by the individual trader or by his designated broker on his behalf.  When choosing an equity trading company, you must consider which attributes of one company you prefer over another.  The biggest consideration for most will probably be the charges for services rendered.  Price plans vary greatly between different equity trading companies in India.  Some will charge to open a demat account, some will not.  Some will charge a monthly maintenance fee, some will require a minimum balance to be held in the account.  Some will charge a per-transaction fee, and so on. 

Whatever your circumstances are, it is always best to talk things through with an experienced professional beforehand to get a better idea of what options are available.  There will, no doubt, be certain considerations that you will have overlooked or not thought about which only a professional will be able to enlighten you on.  GOODWILL INDIA are a well-known discount broker who offer exceptionally low rates for traders.  Their friendly and knowledgeable staff are ready to educate you and clear your doubts.  Call GOODWILL INDIA on +91 80122 78000 to talk about your investment prospects with equity trading.

What is the Commodity Trading Strategy in India?

Are you considering stepping out into the world of commodities trading in India?  Before you begin, please take heed.  Many have tried and failed before you.  Accounts have been wiped out in an unspectacular fashion by as little as one or two bad trades.  This article will give you some important advice on how to avoid the common mistake made by many who have gone before.  Only a few dedicated and disciplined individuals are destined to succeed on this battlefield.  Maximise your chances of being one of those successful ones by doing things slowly and carefully rather than aimlessly jumping in with both feet.

The most crucial action you need to take is to hold back your eagerness to begin trading and calmly take some time to draw up your Commodity Trading Strategy.  This is a plan which will help you visualise your horizon and help to lead you there.  The thing to remember is that a plan is only of any use if you abide by it.  Discuss this with your broker or Portfolio Manager and ensure you put the effort in early to design the best commodity trading plan to suit your needs. Lay it out on paper.  Refer to it regularly and do not deviate or pull away from the rules you set yourself.  If necessary the plan can, and should be revisited and revised as you become a more experienced trader and possibly ready to accept more risk. On the other hand, if you are suffering losses you can always tighten the plan to limit the risk until you feel more comfortable.

A very useful thing to do, which will help you to tweak your plan is to keep records of every single trade you do.  As you do more and more trades you can start to build up a chart or a graph to illustrate where you entered and exited.  This will be invaluable in helping you identify patterns and discovering where you are making mistakes.  By looking back to see where you went wrong, you can decide what not to do next.  Traders who do not plan, and do not look back to evaluate their past trades are essentially carrying on regardless with no clear focus on where they are headed.  They will repeat mistakes that have already been made before as they have not taken the time to realise what they have done.  

How much should you begin trading with?  This question has no right or wrong answer.  Many new traders start off with relatively small amounts, less than 10 lakh rupees for example. Some advisors will say that is not enough and will point out endless examples where small accounts like this have been wiped out in no time at all.  In actual fact, although the statistics do show that these low-value beginner accounts frequently do get wiped out, it is not necessarily due to the fact that they are low-value to begin with.   Another more plausible likelihood is that these traders are just dipping their toe in the water and are not properly prepared for what they are getting into.  They will most likely not have proper plans and strategies in place to help them avoid the pitfalls that are so often fallen into by novice traders.

A lot of what goes into your commodity trading plan will be based on information from you, yourself.  There is no one-size-fits-all plan to suit everybody (if there was, everybody would be getting rich).  This will depend on factors such as whether you want to be a long-term or short-term trader.  In line with how much profit you decide to aim for, balanced against how much risk you are prepared to accept, you should decide fixed points to stop and sell (limiting loss) and be sure not to go below your own limits.  It is a difficult thing to let go and accept the loss but your plan will need to have rules for such situations.  Starting with a larger amount in the first place certainly will make it easier to ride the losses and get back on track, but even when trading with a small initial investment, it is possible to stay out of danger by ensuring the loss you deem acceptable to bear is at least equal to or preferably less than the profit you intend to gain.

Last but by no means least, is to keep a keen eye on the market rates of the commodities you may be interested in trading in.  Remember that markets go up and down, due to various factors.  It is never wise to keep all your eggs in one basket.  Even if you are an expert in one particular commodity, you would not wish to assign your entire trading account to that one commodity only.  Diversification is a great way of limiting loss by the effects of steady and reliable stock helping to ride over the loss suffered by unreliable and unpredictable stock.  With this in mind, study well and have a serious think about the types of commodity trading you may wish to get involved in.

Good Will India are one of the top online commodity trading platforms in India.  Their helpful and knowledgeable staff are only ever a phone call away.  Should you be contemplating investing in commodities trading in India, you would find it very beneficial to talk it over with a Good Will expert who can clear your doubts and give you the information you need to allow you to make an informed decision as to whether or not commodities trading would be a wise venture for you.  Call Good Will India on +91 80122 78000 today.

What is the future of Real Estate Investment?

Real estate is considered to be an immovable asset.  In most cases it refers to an area of land (naturally this must be a fixed location).  It can include assets contained on or in the land.  Examples would be buildings, minerals, other natural resources, crops upon the land and the water within the land.  Real Estate has traditionally been a reliable investment option seen as less risky than investment in other areas such as stocks and shares.  But is it wise, at this moment in time to be considering investment in Real Estate in India?

Real Estate has never been a fool-proof form of investment, there is no such thing, but it could be considered harder to make a loss in this area than in others.  The price of prime Real Estate has for most of history increased in value to the extent that it outgrows the negative effect of inflation.  There have been exceptions to this rule.  When speaking about India specifically, we can take the Indian ‘property bubble’ of 2001-2007.  Around this time it seemed that there was no stopping the Real Estate sector, as buildings were being constructed, and money was being injected at record levels.  It was speculated that a lot of the funding for these projects was sourced from black money.  When the ‘property bubble’ broke due to over-availability of commercial and residential buildings that nobody wanted or could not afford, the result was that several large property development companies defaulted on their loans.  Several developments were seized by creditors and auctioned.  The following years saw a slump in prices as they were slashed to encourage buyers to take up the unoccupied buildings. 

If this is the case then why invest in Real Estate? In 2016 the Real Estate (Regulation and Development) Act, 2016 came into being.  This Act of parliament lays down several important rules that aim to make the building and construction elements of Real Estate more transparent and safer for home-buyers.  Previously home-buyers were being taken advantage of by builders, and many found themselves in problematic circumstances when builders defaulted on loans that were taken out under home-buyer's names.  The Act purports to stop the injection of black money into property developments by demanding that 70% of the money is deposited via cheque so that its origin can be traced.  All commercial and residential Real Estate projects over 500sq/m (or 8 apartments) must be registered with the Real Estate Regulatory Authority.  It also makes it mandatory for the carpet area of a property to be specified to the buyer.  This is to avoid the practice of builders stating built-up-area or even super-built-up-area measurements to confuse buyers into thinking the property has more use-able space than it actually does.

With the new Act serving to clean up the Real Estate Development sector, renewed faith in the market has seen it return to its usual self after the disaster of the ‘property bubble’ bursting.  With this in mind, we can confidently say that there are still future benefits of Real Estate investment in India.  But having said that, we must be mindful of how to invest in Real Estate.  Careful consideration must be given to the location chosen to ensure maximum return on investment.  Even the best luxurious accommodation will be in low demand if it is constructed in a remote area devoid of amenities or work prospects.  Land in such areas may seem cheap, but there is a reason for that; low demand.   Even the oldest, poorest condition building may be worth a lot of money due to its location if the area is desirable.  One trait among Indians is that they like to stick together.  The cost of housing is inflated by the desire to live close to family members.  Houses in older, more established areas often sell for much higher prices than equivalent or even better living accommodation in new developments for this very reason.  There are multiple ways to be a winner with Real Estate.  There are many options.  Here are just a few examples:

• Purchasing plots to leave them undeveloped and sell on at a profit when development grows up around them

• Purchasing existing buildings in order to earn money from rent (passive income)

• Purchasing plots to develop. Adding value by constructing buildings then selling or leasing them.

• Purchasing land that is rich in minerals or natural resources and then selling the rights to mine or extract the resources

• Purchasing farm land and then profiting by sale of the crops.

In any of the cases where the land is to be re-sold, the most important consideration to be made would be to make sure you purchase in an upcoming area.  It will be necessary to study the area in depth before taking any big decision.  Prices are driven up by demand.  Buying early when there is very little demand will enable you to buy for a low rate.  As an area becomes developed and established the demand rises and so does the value of the land.  Choosing the best area will depend on such factors as local amenities, availability of jobs, threat of natural disasters, flood defense, water availability, connectivity to road and rail networks, and many more.  You will be best advised to avoid areas which are experiencing a downturn in their fortunes.  Sometimes areas which were once posh and upmarket become run down and turn into slums.  The famous saying goes ‘always buy the worst house on the best street, never the best house on the worst street’.  The saying makes note of the fact that it is relatively easy to tidy-up or recondition a building therefore increasing its value, but it is not usually possible to make a building desirable if it stands in an undesirable location.  Unless you can purchase the entire street you are unlikely to be able to have any power to reverse an area’s slump into decay.

Before taking any big decision, it is always worth getting the opinion of an expert.  Talking through the pros and cons of any big financial investment will help you to make an informed decision based on market facts and experience.  Buying a family dwelling for the purpose of living there, with no intention ever to sell is a completely different situation from buying purely to sell at a profit.  There are instances where buying Real Estate is a sensible option as part of a balanced investment portfolio, to counteract the risk of investing in other fields, or simply to compensate for the rate of inflation.  Decisions should not be made on impulse or with emotions running high.  It is recommended to discuss your ideas with a professional portfolio manager and not simply rely on the words of property brokers, builders or sellers who have no consideration for your best interests and simply want to sell their property to you.

Investment Advisory: https://gwcindia.in/

Do Political Changes Affect the Share Market?

Political changes do not affect the stock market itself, but the actions of the traders affect the stock market.  The actions of the traders may be influenced by what they have seen or heard about political changes happening or said to be happening in the country.  Short-term fluctuations due to trader uncertainty and confusion may occur, but usually are quickly ridden out, and the market settles itself again.

It is important for long-term investors to concentrate on their long-term goals and not get tied up with worrying about short-term fluctuations.  India is a democratic country and elections will keep happening every five years at the least, so we cannot shy away from stock market trading simply because of this unavoidable recurrence.  In fact statistics show that despite some surprising outcomes, the last six elections in India have had little effect for those who invest in stock market. 

Looking back into the history of the tenures of Indian governments, some which collapsed within days or months, the figures speak for themselves and demonstrate that the stock market almost carried on regardless of the political landscape.

During the 1989-90 tenure of V. P. Singh, the Sensex actually shot up by 73% in only 11 months.  And this was under the regime of a Socialist Prime Minister who is known to have given his acceptance to the recommendations of the Mandal Commission.  This is a clear warning that anyone considering investment in share market should not fall for the labels that the media attach to Prime Ministerial candidates such as ‘business-friendly’, ‘reformer’, ‘socialist’ etc.  History has proven these to be nothing but red-herrings.

Take for example the 1991 election which resulted in a minority Congress government headed by P. V. Narasimha Rao plus coalition members.  This leadership group was labelled as being ‘anti-market forces’.  However, if one was to compare the market returns during this regime to the market returns under the Rajiv Gandhi-led regime of 1984-89 (Gandhi having been elected with a strong majority), it becomes apparent that returns of over 20% occurred in both instances.  This example goes to prove that whether or not a minority or a majority government happens to be in power, it does not seem to adversely impact on the market.  This is counter to most people’s assumptions that a minority government would be bad for traders.

Historians and commentators have noted that despite political parties and leaders having fierce rivalries driven by strong political ideologies, their stance on business does not differ greatly in real terms.  Under the rulings of successive governments, the journey of the stock markets in India has been calmly taking the same course.  It has not been often that the decisions of one leader in regards to finance and business matters have been outright reversed by a successive government.  All governments appear to be heading in the same direction when it comes to developing India’s economy.  Their political ideologies do not tend to interfere with this, so other than micro-fluctuations, the long term view does not change to any great extent. 

The important point to keep in mind is that regardless of all the turmoil that Independent India has witnessed, (foreign currency crises, threat of war, conflict over Kashmir, collapse of governments to name a few example causes), the markets have still never generated negative returns, and that is a fact.

Anybody considering getting into share trading in India would be wise to investigate onlineshare trading.  The benefits of trading using an online platform are manifold and include the ability to make instant transactions from your mobile device, save time by bypassing the middleman, real-time tracking of your portfolio allowing instant overview of its performance, and access to online tools and calculators that help you make informed decisions.

GOODWILL INDIA are one of the best places to begin your foray into online trading.  We are well placed to cater for the needs of the new investor.  Our resources and courses will provide you with valuable knowledge and skills to ensure you get off to the best possible start.  Why not contact us now? Our friendly and supportive advisors are waiting to take your hand and lead you through the door to your future.

What are the Future Benefits of Investment in Gold?

Gold has been used to make ornaments and jewellery for millennia. Prior to 2016, the oldest gold artifact thought to exist was a piece of jewellery from the copper age, found in a necropolis at Varna on the Bulgarian Black Sea in 1972.  That was until a gold bead found in Southern Bulgaria was assessed by experts as being around 200 years older still, dating it from around 4500-4600 B.C.

The human love affair with gold is clearly not a new phenomenon.  But aside from its aesthetic beauty and industrial uses, gold plays a large part in the financial systems of the world.  Let’s take a look at how.

GOLD STANDARD

As gold is so rare, useful, and desirable, it has inherent value.  Being durable, portable and divisible meant it was idea for use as a currency in the earliest financial systems.  Pieces of gold were exchanged for goods and services going back more than 6000 years.  Later this evolved into struck gold coins.  With the advent of paper money, the United States of America tied their dollar to the value of gold.  To achieve this, the maintained a ‘gold standard’ which was a huge stock of gold that correlated to every dollar in circulation.  Paper notes therefore directly represented an amount of gold that the bearer was entitled to demand from the government upon surrender of the paper notes.  Many countries followed this example, but today this system is no longer used.

BULLION

Bullion is the name for quantities of gold which exist in the form of gold bars.  In this state they do not provide any practical function, but they are easy to manufacture, handle and store.  To be put to use they must be melted down and re-purposed.  Companies, individuals and governments may choose to store gold bullion as it is less a volatile asset than the legal tender of any given currency.

WHY IS GOLD SEEN AS AN INVESTMENT?

While currencies are subjected to inflation year on year by the issuing governments, gold follows no such suit.  1 crore rupees in 1990 has the equivalent purchasing power of 7.35 crores in 2019 because of the devaluation of the rupee over time.  Gold in fact follows an opposite trend, whereby the value has been seen to continuously rise over the years.  For example 10 grams of 24 karat gold in 1990 could be bought for 3,200 rupees.  The same 10 grams in 2019 would cost Rs.35,220.  This is why gold is often seen as the wise choice for investment as it can offset the effects of inflation that cash in the bank is subjected to.  If you are considering investing in gold in India 2020, it may well be a viable proposition for you.

THE DOWNSIDE OF INVESTING IN GOLD

Now that you are aware of the future benefits of investment in gold, you should also know about the negative points.  Just as the companies, governments etc. who hold gold bullion have to deal with keeping it safe, this also applies to the individual.  This can sometimes detract from the benefits of investing in physical gold.  Individuals are unlikely to already possess an industrial grade safe, electronic security systems and security guards.  Gold can be easily melted down and re-purposed, which means that if it is stolen it can very quickly become unidentifiable and is very difficult to recover.  Many banks and security companies offer safe storage in safe lockers and vaults, but the rental of these lockers comes at a price.

GOLD WASTAGE

India is at the top of world when it comes to gold jewellery.  Rather than hide gold away as bullion, ladies would much rather make it into some beautiful jewellery that can be worn, displayed and admired.  This desire to display the gold comes with its own risks.  Not only is theft or loss a real threat when the gold is being paraded in public or even at home, but the likelihood of placing it in secure storage every day is less, which increases the danger.  As fashions change and the jewellery changes hands from one person to another, they may express a desire to change the design or use the gold to make something new.  Not only does the goldsmith charge for his time in manufacturing the new piece, but a certain amount of the gold is inevitably wasted each time it is melted down and made into something new.  In the case of raw gold bullion being made into jewellery for the first time, additional metals are needed to be alloyed with the gold to make it strong enough to be used as jewellery.  These additional metals themselves cost money at the same time reducing the purity of the gold itself.

FRAUDULENT VENDORS

Checking the purity of gold is not something that can easily be done by the investor himself.  A trusted expert will need to check and confirm that the investor is actually receiving what he thinks he is purchasing, as there are many unscrupulous vendors who will try to pass off gold alloys as 24 karat, or exaggerate the percentage of gold contained in an alloy product such as jewellery.

How Risk Management Can Save your Trading Account

Commodity trading in India, or indeed any sort of stocks and shares trading, has an inherent amount of risk associated with it.  There will not be any trader who has not faced, or who will not face a loss of some degree at some point in his or her trading career.   Losses come as part of the package, but with careful planning they can be limited to such an extent that the trader’s entire account should not be wiped out.  Planning ahead to deal with losses before they occur is called Risk Management.

WHY IS RISK MANAGEMENT NECESSARY?
Without the implementation of risk management techniques, it would be incredibly easy for a trader to lose all their accumulated profits as a consequence of just one or two bad trades.  As we have already mentioned, losses are a given in the world of trading.  Losses can be overcome and worked through, but heavy losses can put an end to your trading account and mean you would have to begin again from scratch.  You will begin to appreciate the importance of commodity trading risk management.

Stepping out onto the path of online commodities trading is like beginning a long-haul flight.  You would not take-off without ensuring there was sufficient fuel in the tank.  Not only sufficient fuel, but enough RESERVE fuel to last you through any unforeseen complications and diversions along the way.  It can never be assumed that a flight will go smoothly from take-off to landing, as there are many variables that are beyond the control of the pilot.  Just as a flight without safety measures could be a death-trap, online trading risk management will be your safety measures to ensure you do not crash your trading account to zero.

RISK MANAGEMENT TECHNIQUES
Do not take big risks.  Excessive use of leverage has seen many a trader commit trading suicide by taking unnecessary and avoidable risks.  Never be over-confident, over-emotional or headstrong.  Always assume you could lose, and make sure you can cope with the loss.  Have a plan and stick to it.  Decide the price at which you can afford to buy and can afford to sell.  Do not make the trade if it does not fall within your planned limits.  Very rarely does a trader make his fortune from one or two huge trades.  More than making large profits on one trade, the success comes to those who can make small profits but do it consistently and regularly, while at the same time avoiding the losses.  

THE 1% RULE
A tactic used and recommended by many traders is called the 1% rule.  When following this, you should never put more than 1% of your entire capital into one trade.  This works for all occasions, as the value of the 1% will be higher depending on how much capital you own, but you will always be protecting the rest of your capital.

‘STOP LOSS’ AND ‘TAKE PROFITS’ TECHNIQUE
Decide in advance how much loss you can realistically afford to bear.  Sell when the stock reaches your cut-off point and bear the loss.  Do not let emotion take over and bury your head in the sand by convincing yourself that it will rise up again.  Decide in advance how much the stock needs to rise to before you will sell it and take the profit.  Do not get over confident and convince yourself that the value will keep rising further.  Sell at your cut-off point and be happy with the profit. Holding out for more can, and frequently does backfire.

If you wish to use this technique, you can use a calculation of [(Probability of Gain) x (Take Profit % Gain)] + [(Probability of Loss) x (Stop-Loss % Loss)] to calculate your expected return.  This is invaluable in helping you make the decision of whether or not to buy stock.

DIVERSIFICATION
Markets can be volatile.  It would be unwise to concentrate only on one commodity as an unexpected crash in value would be catastrophic for you.  If you diversify between several different commodities, at least it would be possible for the others to cover the losses suffered on one.

TAKE EXPERT ADVICE
For the inexperienced trader, this business of trading risk management may seem like rocket science.  Expert advice is always on hand from GOODWILL INDIA.  Their experienced staff pass on their expert knowledge to new traders in a way that makes sense to them.  Remember not to take-off that flight until you have safety precautions in place.  GOODWILL INDIA will provide you with the safety precautions you need to fly the right path to commodity trading success.