Commodity Trading Techniques
Learn Commodity Trading Technique
Trader say Commodity future trading is the safe bate as compared to the stock trading. It is not because of the low margin it attracts for the trade. Trading in the commodity future is a structured affair and it is balanced globally hence forth is safe to trade in commodity. The demand and supply curve which makes the movement in the commodity price is always over shadowed by the global activities. Though it is a broad and wide spectrum of study but much time the traders used to neglect its study and analysis. It is my sincere requests do not ever analyze the commodity price based on technical indicator, oscillator or moving average study alone. You must understand the internals of the commodity trading.
Tradable commodity is classified into 2 categories
- A. Cyclic commodity
- B. Non Cyclic Commodity
Further more commodities are classified as the nature dependent and industry dependent. Going one step further it is classified into two more categories economy dependent and economy independent commodity. All agree cultural tradable commodities are cyclic, nature dependent and economy dependent too. Similarly all industry used metals, energy products are non cyclic, industry dependent and economy dependent. Some economists also argued that semi cyclic commodity. The demand of a specific commodity is complex tasks to analyze since it depends on many inter continental and global factors. As a trader though you require the sound knowledge in all these but it is quite difficult to master. Hence the next way out of this problem is "Simplest analytical procedure to understand and apply in commodity trading"
- a. For cyclic, nature dependent and economy dependent commodity the fall in production is directly proportion to the raise in price.
- b. For non cyclic, industry dependent commodity the price is directly proportional to the demand.
The most intelligent method to analyze this commodity price is to use the correlation analysis of domestic currency with the domestic commodity price. The correlation tool is readily available in Microsoft excel to do the job for you. The 2nd intelligent procedure to identify the price trend of the commodity will be using the cycle theory approach of the Elliot, W.D.Gann. As a commodity trader identify the trend using the cycle theory approach, do the correlation analysis with domestic or any global standard currency. if possible find the beta and initiate a successful trade . Though the information given by me is half cooked but I have given the hint for all the necessary parameter which you need to do a perfect commodity analysis. The beta decoupling method also has great success in commodity trading.