Question

The Cartel Movement was one attempt to find a means by which to provide producing nations with a higher rate of return from the export of commodities. State and explain three other attempts to fix the “commodity problem” and evaluate the effectiveness of each.

Answer 1

The three other attempts to fix the “commodity problem are as follows

                    Maintaining stop loss

Trading in commodity always have a steady certain degree of risk because it come up with various factors, all sell or buy have losses at a particular levels. The main reason why traders give up trading is due to huge losses they suffer as they normally would not place a stop loss in their trading strategies. We can always maintain appropriate stop which will further help us from losses and maximise profits.

Market attention

These techniques can be gained by constant market attention over a period of time. Avoiding common mistakes will help improve gains. Planning ahead of trading is also important. Any sudden price movement may not be a proper entry or exit point of your trade. Every successful trader has his own system that helps them improve profits and keep losses at a minimum.

Diversifying capital

It is very essential to articulate the proportion of risk and reward. One must know in advance how much risk he can afford on his available capital while trading in futures. Also, never invest the whole money in a single commodity. The best option is to allocate the capital in different assets, so any wrong trade resulting in a loss can easily be halted. In addition, while facing any uncertain situation, the ideal strategy will be to remain patient until a clear picture is revealed. Executing a bad decision is worse than not trading at all. Compared to equities, a commodities futures contract provides greater flexibility to the participants, helps the hedgers to protect their