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Of all the important skills in trading, survival is number one. For unless we make it through the inevitable bad times, we won’t be around to capitalize on the good. I’ve laid out some trading account guidelines that specify the account size required to conduct various commodity futures and option trading activities. Stick within these guidelines and you will have an edge on most of the commodity trading public.

Here are my general money management guidelines to improve your chances of commodity market survival and trading success:

$5,000 ACCOUNT
Risk no more than 10% max ($500)

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Most indicators that come pre-programmed in technical analysis charting software use static input parameters. This is the simplest solution, but not necessarily the best.

Many indicators were originally designed for use on daily data, so an average cycle length was estimated based on a monthly cycle. Many momentum indicators by default had an input parameter, or lookback period, of 14 bars, supposedly reflecting a half cycle of 28 days in the month, since most momentum indicators are best using one half cycle period. However, there are only about 21 trading days per month, and a cycle measure of 20 is more accurate than 28 as an average on most daily charts. In my opinion the 14 period parameter just stuck because so many people started using it, even though it was probably based on a false assumption. Some charting software, by default, used a 9 period lookback rather than 14, probably in an attempt to reflect a more accurate monthly cycle.

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