Fundamentals of Trading Commodities


Published on

The fundamentals of trading commodities are those basic principles from which everything else flows. The nuts and bolts, the fundamentals of trading commodities, derive from basic information about commodity supply and demand and, technical commodity trading, how the market reads and reacts to those basics. The eventual price of a commodity on the delivery date of a commodity futures contract will be absolutely based upon supply and demand of the commodity in question. The prices of futures contracts will always be based upon knowledgeable estimates of what that price will be on the delivery date. Traders follow commodities fundamentals with fundamental analysis of factors influencing production, demand, and supply chains. They follow commodities markets with technical analysis tools in order to anticipate short term market trends and market reversal. In beginning commodity futures trading the trader will be well served by taking commodity and futures training.

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Fundamentals of Trading Commodities

  1. 1. Fundamentals of
  2. 2. The fundamentals of tradingcommodities are those basicprinciples from whicheverything else
  3. 3. The nuts and bolts, thefundamentals of tradingcommodities, derive from basicinformation about commoditysupply and demandand, technical commoditytrading, how the market readsand reacts to those
  4. 4. The eventual price of acommodity on the delivery dateof a commodity futures contractwill be absolutely based uponsupply and demand of thecommodity in
  5. 5. The prices of futures contractswill always be based uponknowledgeable estimates of whatthat price will be on the deliverydate. Traders follow commoditiesfundamentals with fundamentalanalysis of factors influencingproduction, demand, and
  6. 6. They follow commoditiesmarkets with technicalanalysis tools in order toanticipate short term markettrends and market
  7. 7. In beginning commodityfutures trading the trader willbe well served by takingcommodity and
  8. 8. In basic and advancedcommodity and futures trading atrader will learn how weatherpatterns affect agriculturalcommodities such as
  9. 9. He or she will come tounderstand how gold futures areinfluenced by the state of theeconomy and how politicalupheaval in oil producing statesaffects oil
  10. 10. As a trader comes to understandthe fundamentals of tradingcommodities it becomes clearthat most if not all of thefundamentals about commoditiesare become known by allcommodity traders at the
  11. 11. To the degree that a trader hassufficient insight to predict majorfundamental changes in acommodity he or she will have avery decided and very
  12. 12. As an example someone living inthe Persian Gulf may havesubstantial insight into politicalof the region which in turn mightlead to another oil embargo. Thistrader might buy oil futures orgas futures with a firm belief thatprices will soon
  13. 13. The rest of the world oftraders, however, will get thenews about a reduction in outputall at the same time. For the vastmajority of those in commoditytrading the opportunity lies inunderstanding and effectivelytrading market reaction
  14. 14. Technical analysis of markets hasbeen around ever since therehave been markets. The wisetrader has understood howcommodity prices fluctuate andhas traded accordingly. Moreformal systems had to wait forrice traders in Japan threehundred years
  15. 15. Traders recognized pricepatterns, recorded them, andnamed them. They came torealize that the fundamentals oftrading commodities includedunderstanding and followingCandlestick
  16. 16. The traders who read Candlestickpattern formations were able tomore reliably predict and profitfrom the rise and fall in the priceof
  17. 17. These same Candlestickanalysis tools work today incommodities trading as well astrading stocks and
  18. 18. Knowing and using thefundamentals of tradingcommodities helps tradersunderstand the potential range ofa commodity price throughfundamental
  19. 19. By using technical analysis thetrader is able to follow andpredict price movement overdays, hours, and even minutesduring day
  20. 20. Of the two, fundamental andtechnical analysis, it is typicallytechnical analysis that helps thetrader with short term decisionson buying and
  21. 21. Market
  22. 22. The Dow moved right to the 200day moving average on Friday.After three strong tradingdays, todays selling was evidentfrom the open that the profit-taking had set
  23. 23. The fact that it could not get upthrough the 200 day movingaverage made it obvious the 200day MA was acting as resistance.What does this indicate for theprice
  24. 24. The Bearish Harami revealed thebuying had stopped. Witnessingthis right at the 200 day movingaverage immediately allowed foran assessment of what the trendmight be doing
  25. 25. The failure of the Dow to go upthrough the 200 day movingaverage made the prospect of aprofit-taking pullback to the 50day moving average very
  26. 26.
  27. 27. www.CandlestickForums.comDOW
  28. 28. The same analysis can be appliedto the NASDAQ chart. Aftergapping through the 50 daymoving average onFriday, todays selling wouldmake the 50 day moving averagea likely
  29. 29. Knowing the simple rules aboutcandlestick signals and themoving averages allows aninvestor to make a gameplan, even if it is relatively
  30. 30. In the case of the NASDAQ, oncea potential resistance level hasbeen breached, prices usuallycome back and test the resistancelevel to see if it will act assupport. This reason providesforesight to see what type ofsignal will occur at the 50 dayMoving
  31. 31.
  32. 32.
  33. 33. Understanding the makeup ofinvestor sentiment that formseach signal allows an investor tobe prepared for the next pricemove. As illustrated in the LiveCattle chart, the long legged Dojiof Friday indicated a possiblereversal of the
  34. 34. Knowing what should occur aftera Doji makes the next daystrading relatively easy. AlthoughLive Cattle traded up slightlyafter the open, it eventuallymoved in the direction showingthe failure of the next
  35. 35. Once it traded back below the T-line, it could be assumed theBears are back in control. Thiswould have instigated closing outlong positions and/or addingshort
  36. 36. Oct Live
  37. 37.
  38. 38. The candlestick signals provide ahuge advantage for day tradersand commodity traders. Whendecisions need to be maderelatively quickly, knowing whatshould occur after a candlesticksignal allows for
  39. 39. This is nothing more thanhundreds of years of observationsin a graphic formation. Learnhow to use candlestick signalsappropriately and you will putyour trading probabilities aregreatly in your