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A commodity trading plan is a written set of rules for how you’ll trade: what markets, when you’ll enter and exit, how much you’ll risk, and how you’ll review results. Without a commodity trading plan, decisions tend to be driven by headlines and emotion. This guide walks through the parts of a solid plan, shows what a filled-in example looks like, and gives you a simple template to adapt.
Why a written plan matters
Commodity futures are leveraged and volatile. As a result, decisions made in the heat of the moment, such as doubling a losing position or abandoning a stop, can do lasting damage. A plan you write in advance, while calm, gives you rules to follow when markets get stressful. The CFTC’s Futures Market Basics describes futures speculation as complex and rarely suitable for individual retail investors; if you choose to trade anyway, a written plan can document your decisions. The CFTC also warns that leveraged losses can exceed the initial margin deposit. A plan does not remove that obligation.
There’s a second benefit that’s easy to miss: a written plan makes your results measurable. If every trade follows the same rules, your journal tells you whether the rules work. If every trade is improvised, a losing month tells you nothing except that you lost.
The parts of a commodity trading plan
1. Goals and limits
First, state what you’re trying to achieve and what you can afford to lose. Be realistic, and use only money you can afford to lose entirely. Write down the total loss at which you will stop trading and reassess, not just per-trade limits. This “walk-away” number is the most important sentence in the plan.
2. Markets you’ll trade
Next, pick a small number of markets you’ll learn well, for example gold and crude oil. For each, note the contract size, tick value, trading hours, key reports and expiry dates. Check these against the exchange’s own specifications, such as CME Group’s gold contract fact card, rather than relying on memory or a forum post.
Scheduled reports deserve their own line in the plan because they move markets on a known timetable. For crude oil, the U.S. Energy Information Administration publishes weekly petroleum inventory data; for grains and livestock, the U.S. Department of Agriculture issues regular supply and demand estimates. Decide in advance whether you’ll hold positions through these releases or stand aside.
3. Your approach
Then, describe how you’ll decide to trade. Will you use fundamental analysis, such as inventory reports and crop data? Technical analysis, such as price trends? Or a mix? Write down the specific conditions that must be true before you enter. “Gold looks strong” is not a condition. “Price has closed above the 20-day high and the weekly trend is up” is.
4. Risk rules
This is the most important section. Include:
- Maximum risk per trade, as a fixed amount or small percentage of your account.
- Maximum total risk across all open positions, including positions in related markets that tend to move together.
- A daily or weekly loss limit at which you stop trading.
- How you’ll size positions based on your exit point. Our guide to position sizing for commodity traders covers the arithmetic.
- A margin buffer rule and a response to a margin call; additional cash requirements or liquidation can still occur.
5. Entry and exit rules
Additionally, define exactly how you’ll enter, where you’ll exit if wrong, and how you’ll take profits. Decide whether you’ll use stop orders, and remember they don’t guarantee your exit price in a fast or gapping market. Write down what you’ll do if a trade goes nowhere for a set period; a time-based exit stops capital sitting idle in a trade that has stopped working.
6. Expiry and rollover
Futures contracts expire. For physically delivered contracts such as crude oil, holding past first notice day can create delivery obligations you don’t want. Note the number of days before first notice day or expiry at which you’ll close or roll each position, and build the roll cost into your expectations.
7. Review process
Finally, keep a trading journal and review it on a set schedule. Look for patterns in your wins, losses and mistakes. For each trade, record the date, market, direction, size, entry, exit, planned risk, actual result, and a one-line note on whether you followed the plan. The last column is often the most revealing.
A simple commodity trading plan template
| Section | Your answer |
|---|---|
| Capital set aside for trading | Amount you can afford to lose |
| Walk-away loss | Total loss at which you stop and reassess |
| Markets | e.g. Micro Gold, Micro WTI Crude |
| Reports to respect | e.g. weekly EIA inventories, USDA estimates |
| Setup conditions | What must be true before you enter |
| Max risk per trade | Fixed amount or percentage |
| Max open risk | Total across all positions |
| Daily loss limit | Point at which you stop for the day |
| Exit if wrong | How you’ll set your stop or exit |
| Profit-taking | How and when you’ll exit winners |
| Rollover rule | Days before first notice day |
| Review schedule | e.g. every Friday |
What a filled-in plan looks like (illustrative only)
Here is how one trader might complete the template. The numbers are examples to show the level of detail, not recommendations.
- Capital: a fixed sum set aside in a separate account, with a walk-away loss of a quarter of it.
- Markets: Micro Gold and Micro WTI Crude only, until the journal shows a full year of disciplined trading.
- Reports: no new crude positions in the hour before the weekly inventory release; existing positions reduced by half.
- Setup: trade only in the direction of the weekly trend; enter on a daily close beyond the prior week’s range.
- Risk: a small fixed percentage per trade, no more than twice that across all open positions, and a daily stop equal to two losing trades.
- Exit: initial stop beyond the recent swing; trail it under each new higher low; close any trade that hasn’t moved in its favour within five sessions.
- Rollover: record the precise product’s settlement method and broker deadline, then choose an earlier review date rather than using the same notice-day rule for every oil contract.
- Review: every Friday evening, plus a monthly summary of win rate, average win versus average loss, and the number of rule breaks.
Test the plan before you fund it
Before trading with real money, run your commodity trading plan through paper trading for long enough to see a range of market conditions. Treat the paper account exactly as you would a real one: same size, same rules, same journal. The purpose isn’t to prove the plan makes money in a simulation; it’s to find the parts that are vague, unworkable or that you keep breaking. A rule you cannot follow in a simulation needs revision before you consider risking money. A successful simulation does not prove that live execution will match it.
Common commodity trading plan mistakes
- Writing a plan, then ignoring it once trading starts.
- Trading too many markets at once, so none is understood properly.
- Skipping the risk section or leaving it vague (“I’ll be careful”).
- Changing rules after every losing trade, which turns the plan into a diary of regrets.
- Forgetting expiry dates and discovering first notice day the hard way.
- Reviewing only profit and loss, not whether the rules were followed.
For the basics of how one market trades day to day, see our guide to crude oil trading basics.
Frequently asked questions
Does a trading plan guarantee profits?
No. A plan improves discipline and consistency, but losses are still part of trading. A plan records intended limits, but gaps, execution problems and leverage can push actual losses beyond them.
How often should I update my plan?
Review it regularly, but change rules deliberately after reviewing your journal, not in reaction to a single trade. A good habit is to allow changes only at the scheduled monthly review.
What’s the most important part of a commodity trading plan?
The risk rules. They determine whether a run of losses is a setback or a disaster.
How long should I paper trade first?
Long enough to see quiet markets, trending markets and at least one sharp shock. There is no simulation period that establishes safety or profitability. Include fees, slippage assumptions and adverse scenarios, then record what the exercise still cannot test.
Conclusion
A commodity trading plan doesn’t need to be long. It needs to be specific, written down, and followed. Decide your markets, your setup, your risk limits, your exits and your review schedule while you’re calm, test it on paper, and then let the journal, not your mood, tell you when something needs to change.
Trading futures involves substantial risk of loss. Past performance does not guarantee future results. This article is for education only and is not financial advice.
