Trading Commodity Futures

By
www.ProfitableTradingTips.com
Trading
Commodity
Futures

http://profitabletradingtips.com/profitable-
trading-tips/trading-commodity-futures
We wrote recently about Winning with
Commodities. What one trades are
commodity futures.

For example, when a trader expects
the price of gold to rise he can buy
gold bullion or shares in an exchange
traded fund that tracks the price of gold
bullion.

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And by trading commodity futures on
gold bullion he can lock in a price to
buy or sell gold at a later date.

Trading commodity futures is a
common practice by both the
producers and buyers of commodities
such as wheat, corn, soybeans or live
cattle.

They do this in order to hedge their risk
in case of a price change.

And speculators trading commodity
futures buy and sell futures on the
same commodities in search of profits.

Basics of Commodity
Trading

The basics of any commodity have to
do with supply and demand and how
these affect current price.

Gold futures go up when the economy
weakens and down when the economy
is strong.

Gold bugs hoard gold as a hedge
against inflation.

In trading gold a trader bases his
trades on both fundamentals and short
term market sentiment.

Traders jump in and out of the gold
market based upon their analysis of
prices.

When there is a drought in the
American Corn Belt, Brazil or Ukraine
wheat, corn and soybean prices go up
as traders expect a production
shortfall.

When there are ideal growing
conditions in the major grain producing
regions of the world the prices of corn,
wheat and soybeans tend to fall as a
market glut is expected.

When there is another threat of war in
the Middle East the price of oil rises.

Those trading commodity futures on oil
will expect to see higher prices in the
short term but a return to normal in a
year or so

The introduction of fracking technology
has greatly increased oil and gas
supplies in the USA and is expected to
keep prices low and stable for years.

Nevertheless, chaos in other oil
producing regions of the world tends to
drive prices in the short term

Traders buy and sell futures contracts
on oil and other products based on
their analysis of where the market will
be in a few months or years.

Short Term Market
Sentiment

Markets are never totally efficient in the
short term.

So, there is profit to be made in trading
commodity futures when either good or
bad news hits the markets for precious
metals, energy products or agricultural
products.

Although the fundamentals of any
commodity are available to all traders
the tactics used by each will differ.

Thus trading commodities is a daily,
hour by hour, minute by minute job as
the trader watches and searches for
opportunities in his market.

Knowing the fundamentals of a
commodity is essential to futures
trading.

Skill in the use technical indicators and
the ability to be there when changes
happen leads to profits in trading
commodity futures.

Whether you prefer a heavily
statistically based trading tool or
something as basic and easy to read
as Japanese Candlesticks you can
take advantage of short term market
sentiment in trading commodity
futures.

Trading Commodity Futures

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Trading Commodity Futures