Using Commodity Trading to Get Ahead in Retail
The Wolf of Wall Street might not have been the man when it comes to retail, but the investment tycoon and those like him could have been. Although the worlds of retail and trading might seem as though they’re poles apart, there are quite a few crossovers. In fact, for those that are willing to embrace the core principles of trading, the world of selling could become a lot more profitable. This point has become even more marked in recent years thanks to the rise of online trading. With almost anyone with an internet connection and some capital now able to invest like a pro, more people are starting to understand how to manage a portfolio of assets.
In fact, even those without a semblance of knowledge about commodities can get into the mix. By going online, people can now take part in commodity trading across 27 key markets with the click of their mouse. As well as access to the markets covering gold, silver, oil and more, aspiring traders can access daily market updates, statistical breakdowns and trading guides. Put simply, if someone wants to master the core principles of trading, they can go online and learn. In turn, if you’re a retailer that’s intrigued by the lessons you can learn from the world of CFDS, spreads and indexes, these platforms are perfect.
By way of a prelude to any direct lessons you learn for yourself in the online trading arena, here are three skills trading can teach you.
Every skilled trader can spot a trend at 100 yards. Because the only way to succeed in the commodities markets is to look out for what’s hot and what’s not, traders have to constantly monitor the latest trends. For those in the business, signals are a way of spotting trends. In simple terms, forex signals are pieces of data/information pulled from various sources that help to build up a general picture of a market.
Although you can’t use a signal service in the retail sector, you can look for your own. Using a combination of news, social media and even financial market movements, you can start to pick up the latest fashions. Those that can do this and get ahead of the curve can corner a particular niche and maximise their profits before it’s time to move onto something else.
Knowing When to Stop
Every trader has a loss limit. Although different people will have different limits, the general rule across the industry is 2%. In other words, if your losses equal 2% of the initial investment’s value, it’s time to end it. Now, in the retail sector, you might have a slightly higher margin because sales can fluctuate. However, the point to note here is that you should have a loss limit for every product you sell.
For example, if you start selling sneakers with a 10% profit margin, you might decide to cut your losses when interest fades and you’re having to sell for a 6% margin. Although you’re still making a profit, the loss limit will allow you to keep your stock in line with the trends and, in turn, always be selling items for the maximum margin you can get.
Perhaps the main skill any trader needs to master before they start making a profit is to not overtrade. Putting too much capital into a single trade/set of trades is always a risk. The same is true in the retail sector. Even if a product looks fantastic and is selling thousands of units, that doesn’t mean you should buy more than you can afford. As a general rule, any investment should be a single digit percentage of your total capital. The simple reason for this is that things can change. As we’ve noted above, a hot commodity can quickly turn into a loser. Because of this, you need to know that any single investment wouldn’t damage your entire portfolio and that’s where managing your money comes into play.
As a retailer, planning and analysis matters. Trying to make a profit in a competitive market isn’t easy, which is why it’s worth thinking like a trader before you set off on your next venture.
Content by Daniel Horton