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Learn Commodity Trading

To learn commodity trading, consider Commodity and Futures Training. In Commodity and Futures Training you will learn the types of commodities that can be traded, how futures contracts are set up, and how prices for futures are arrived at. To learn commodity trading you will want to understand why traders trade and how they do it. The point of trading commodities futures or futures options is to make money but that means effective handling of investment risk as well as scouting out commodity trading opportunities. Learning fundamental analysis and technical analysis of the commodities market are both essential for successful trading.

Both agricultural and industrial commodities are traded in their unprocessed state. Wheat is traded but not bread or flour. Gold bullion is traded but not rings and bracelets. A traded commodity is something that varies in price over time. Otherwise there is no point in trading it. Although trading of commodities takes place at the Chicago Board of Trade and the New York Mercantile Exchange traders can access these markets trading online.

Commodity trading is in commodity futures. There are two basic types of traders. Many commodity producers trade in order to hedge their risk. Agricultural cooperatives, mining operations, and large food processing corporations commonly buy and sell commodity futures. For example, a gold mining company may contract to sell half of its expected production of gold bullion at $1,000 an ounce next year even though the current spot price is closer to $1,100 an ounce. This guarantees that, should the gold market collapse, the company will still have a profit on part of its production. Traders who are not hedging on commodities are speculating on commodity prices. The addition of those who simply trade the commodities markets but are not buyers or producers of commodities adds liquidity to the markets by increasing trading volume.

There are two ways to go when you begin to learn commodity trading. The first is to buy and sell futures and the second is to learn commodity trading as options trading in commodity futures. Futures trading is promising to buy or to sell wheat, live cattle, or gold bullion on the contract expiration date. The alternative to buying and selling futures is buying calls, selling calls, buying puts, or selling puts on futures contracts. As in all options trading buyers of options contracts purchase the right to buy or sell but not the obligation. You may want to learn commodity trading but you probably do not want to take delivery of a few tons of refined metal or a herd of cattle. Donít worry. First of all no one will come to your house and dump refined copper on your lawn. However, if you do not exit your contract before expiration you will receive notice of where to deliver or where to pick up your commodity. You will also need to pay or deliver the commodity. Fortunately, options exchange will notify all holders of contracts on the day before expiration that there is one day left. The vast majority of traders exit their contracts at that time.


Market Direction: Was it time to bail out on the big selling day of Tuesday? Many investors thought so. That was demonstrated by the big price move to the downside late on Tuesday afternoon, after the already big down day. It could be seen that there was excessive selling in the final hour. However, there was a few indicators that needed to be confirmed before it was evident that a major reversal had occurred. Most of the time, a Doji followed by selling confirmation the next day, especially in an overbought condition, would have instigated full-fledged liquidation. However, there was still one major indicator that required more evidence the sellers were in control. The uptrend! The tee line had been acting as a consistent support level for the past two months of trading.

Although the selling of Tuesday brought the prices back down below the tee line, the potential sell signal had to be confirmed. The Bullish Harami on Wednesday provided some indication the selling may have stopped. That was confirmed this morning with the bullish premarket futures. The bullish sentiment was obvious on the open. This indicated there was going to be confirmation for the bullish Harami. Once the bullish trading started, two simple candlestick indications provided further confirmation. The Dow was again trading above the tee line and it was trading above the halfway point of the bearish candle of Tuesday. This combination revealed the Bulls were back in control. At this point, it has to be assumed the uptrend is in progress again. The fact the bears did not close the markets below the support level, the tee line, the more this should increase the confidence of the Bulls. This uptrend will continue until a major reversal signal is once again evidenced. Continue to use the tee line as your major indication of whether the uptrend remains intact.

DOW

The bullish Harami is a valuable candlestick signal. It's formation allows investors to immediately access what is occurring during a downtrend/pullback. The positive trading following a hard sell can form a bullish Harami. This immediately shows what is occurring with the trend. Witnessing a Harami, revealing the stopping of a downtrend, makes planning of the portfolio positioning some much easier. Today's positive open would allow the candlestick investor to immediately establish positions that were being confirmed as establishing a pattern.

The positive trading of the markets and the positive trading of SA provided the favorable probabilities that J. hook pattern was continuing its next wave. Being able to assess the general market trend successfully dramatically improves the probabilities of getting into successful trades at the appropriate time. As demonstrated many times before, the success of a J. hook pattern is somewhat predicated on the general markets moving in a consistent direction. The direction does not have to be powerful, it just needs to reveal there is no major change of investor sentiment.

SA

Schedule change - Due to a conflict of schedule, the Day-Trading Training session, scheduled for May 15, has been postponed. The Commodity Training session will probably be scheduled for May 15. The full summer schedule should be posted this weekend on the website.

Chat session tonight at 8 PM ET.

Good Investing,

The Candlestick Forum Team


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