Types of Commodity Trading Strategies

#1
Types of Commodity Trading Strategies
Commodity trading strategies are simply the basis for why and when you will buy and sell commodities. You should have some well thought out strategies before you begin trading commodities. This does not mean watching the financial news or reading a commodity newsletter for the latest trading tips. Rather, you should have consistent strategies that will let you know under what circumstances you will buy, sell and limit your losses.
Most commodity trading strategies use some form of technical analysis for the trading decisions. I mainly use technical analysis when I trade, but I also monitor the fundamentals of the markets. Ill first discuss the basic commodity trading strategies using technical analysis and then Ill include some information on using fundamental analysis for trading commodities.
Most commodity trading strategies consist of either a range trading or breakout methodology. Each type of strategy has its pros and cons, so it is up to your personal taste on which type of strategy might work best for you. I actually use variations of both types of strategies in my trading.
Range Trading Strategy
Range trading in commodities simply means buying near the bottom of a range (support) and selling at the top of a range (resistance). Another way to look at this strategy is that one might look to buy a commodity after it has experienced a lot of selling and becomes oversold. Oppositely, one might look to sell a commodity after it has had a long rally and becomes overbought.
There are numerous indicators which measure overbought and oversold levels like RSI, Stochastics, Momentum and Rate of Change. These strategies work well when the market has no significant trend. However, a trader could have a string of bad losses when a market forms a major trend, as markets can stay overbought or oversold for long periods of time.
Trading Breakouts
Trading breakouts in commodities means that a trader will look to buy a commodity as it makes new highs and sell a commodity as it makes new lows. New highs and lows can easily be spotted on a chart, as they are the peaks and troughs. Many professional traders use these techniques when they are managing large sums of money.
The philosophy for this strategy is simple a market cant continue its trend without making new highs or new lows. This strategy works best when commodities are trending strongly. It doesnt matter whether the trend is up or down, as you are buying new highs and selling(shorting) new lows. The drawback of this strategy is that it performs very poorly when markets dont establish strong trends.
Fundamental Trading Strategy
While trading breakouts and trading ranges usually come with specific setups for buying and selling commodities, fundamental trading leaves much more room for interpretation. For example, you might buy soybeans because the weather has been dry during the summertime and you expect a much smaller crop. Or, you expect demand to increase for crude oil from China, so you buy oil futures.
I do not recommend this type of trading for the new commodity trader, since opinions can easily be swayed the hype that is often reported in the news. Even worse, you will be left wondering where to get in and out of the trades. You can get lucky a couple of times trading off the news, but this type of trading claims a huge share of victims every year.



this is not my blog. in this news i read one blog. i think this is very useful for new traders in traderji. Thats ways here i am post...thanks
 
#2
hi sir,
all the very best for ur initiative for strating of this thread.i have tried intraday in commodities and lost some of my invested amount.now i want to take positional call on crude.i have kept back up of up to 3 lacs and want to average after every 100 points (if trade has gone aganist my position).i took this decision just because i have never seen crude moving more than 800 to 1000 poins either side continuosly.for taking initial position i am planing to use MACD,STOCH.
to all members reading this post,pls share your valuable views,as i am in learning state and would request to guide me
 
#4
Thank you kumarp_1661 for your post. i have recently registerd myself at tradeji.com and this is my first post. i have been trading intraday in commodities for the last few months and have had marginal success in it. But i can see the potential to achieve above average success in intraday trading in commodities if i am able to streamline my trading plans have patience and be quick enough to grab opportunities as they came. So far i have traded intraday without any technical support or tips or any kind of support from outside and just depending upon the candlebar graphs and snap quotes provided by the trading software.
i plan to make trading in commodities a major income generating activity for myself and would be eager to receive any suggestions and tips from the senior and experienced members on this forum.
Thank You.
 

Reggie

Well-Known Member
#5
Averaging down in a trending market means you are holding double the position when the market is moving against you.... Better to exit at a comfortable level of stop loss, and take a small hit. You can always re-enter when the market is moving in your direction. The principal of trading is to buy the higher highs and not vice versa..... My two bits worth.

hi sir,
all the very best for ur initiative for strating of this thread.i have tried intraday in commodities and lost some of my invested amount.now i want to take positional call on crude.i have kept back up of up to 3 lacs and want to average after every 100 points (if trade has gone aganist my position).i took this decision just because i have never seen crude moving more than 800 to 1000 poins either side continuosly.for taking initial position i am planing to use MACD,STOCH.
to all members reading this post,pls share your valuable views,as i am in learning state and would request to guide me
 

MANISH_DAMANI

Well-Known Member
#7
CRUDE HAS AVERAGE RANGE OF 120 POINTS UPDOWN IN GENERAL. Ya if some body have money then he can average but average should be done when its already rallied 400-500 points up or down else waste. See hourly chart for better result , use heiken ashi candlestick in 5 mins chart, 5 ema high/low both, macd, ichimoku, for better resulf. 20-50 ma crossover in crude could give 50-100 points. when there is geopolitical tention buy then never short it doesnot mean that you buy at 500 points rallied market for positional. Buy crude for long term near $80 and then wait for $100+. when ever get opportunity. When ever above $100 sell on every rally subject to fundamental us data news and others. Its only crude in my eyes which can make quick money and bankrupt too. Silver, copper is ok but in my eyes crude is king and risk free if you have money and ability to track and correlate trend and news.
 
#8
Its always risky holding the positions because you cannot figure out the exact peak and low's and you cant judge future..
so its always better to enter and exit with small profits/losses..
 

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