PL Global Impex
Commodity Trading Strategies

Commodity Trading Strategies – Tested And Proven

Introduction

 

Commodity trading shapes the fate of the market. It influences the economy and life of common people every day. The chances of gaining a large profit are equal to the risk of the massive loss in commodity trading. In a blink of an eye, you can either gain everything or lose everything you invested. Therefore, it’s not the game to learn from your mistakes. But, it’s a game to learn from other commodity traders’ mistakes and not repeat them. Commodity trading offers you plenty of opportunities to profit yourself with price movements. However, most rigorously tested commodity trading strategies usually generate the highest and most frequent successes. Below presented are the 5 best commodity trading strategies. Their efficiency has been proven with time and the experiences of individual traders. 

 

Range Trading

 

Range trading is an active investing strategy that can be used in every financial market trading. It identifies a range at which an investor buys or sells over some time. Range trading involves purchasing at the support level and selling at the resistance level.

 

Support and resistance levels are highly influenced by the supply and demand of commodity trading. Support is a price level when demand grows strong enough that prevents the price to fall any further. Similarly, Resistance is a level when supply grows strong enough to prevent any further rise in the price. 

 

The understanding of oversold and overbought territory is essential and significant. In addition to channel range charting, traders should use relative strength index, momentum, rate of change, and stochastics when trends are hard to identify. Support and resistance levels are only estimations. There is a risk that the commodity’s value reaches beyond the estimations.

 

Scalping

 

A scalping trading strategy is a way of making profits through minor fluctuations in prices. A trader is called a scalper when he makes profits from frequent small changes in the price and then leaves before any loss can negatively impact the profits made. 

 

In scalping, a trader reduces the chances of loss and increases profits by a small percentage. Individual profits may seem less but the collection of such small frequent profits can make a huge profit combined. 

 

Scalping commodity trading strategy is one of the most profitable commodity trading strategies. It involves a brief time of communicating the market events. Hence, it reduces the chances of losing in any adverse event. 

 

Moreover, these small movements are more frequently occurring than the larger movements. Even in the quietest markets, where large movements are rare; these small movements keep occurring frequently.

 

If you want to earn a decent amount of money through a scalping trading strategy, then you have to make approximately 100 small movements every day. When the market runs dry, scalping can still make you earn.

 

Breakouts

 

Breakouts trading strategy aims at capitalizing on short-term movements. A trader using a breakout strategy will aim to buy just before the commodity prices rise substantially higher or sell just before the commodity prices fall substantially lower. 

 

The philosophy behind breakout trading is extremely simple. Stabilization of trends is highly unlikeable. The market continues its trends and it keeps making new highs and new lows. When trends are strong and long-lasting, the Breakout strategy works at its best. In breakout strategy, traders buy at new highs and sell at new lows. Therefore, it doesn’t matter whether the trend is up or down.

 

It can be used while using a ranging strategy with specified support levels and resistance levels. However, the breakout strategy is not limited to support and resistance levels. It can occur at any time between tops and bottoms. 

 

Breakout strategy performs poorly when markets are unable to establish strong short-term movements.

 

Commodity Trading Strategies

 

Fundamental Trading

 

Both technical and fundamental indicators are determinants of Fundamental trading. It focuses on company-specific events to buy or sell the commodity. Fundamental trading strategies are based on peculiar market factors instead of technical trading dynamics.

 

The supply and demand of oil is a perfect example of a fundamental trading strategy. If any country announced an increase in demand for oil, an obvious expectation is the rise of price. A trader who’s aware of the news will seek the opportunity and benefit himself through the long position. For example, during the dry summer season, a trader buys soybeans with an expectation of increasing demand with a small supply of the harvested crop.

 

A fundamental trading strategy requires an extra amount of time for research. Most of the time, it’s easier to watch technical charts than to go through the fundamental forecast. Moreover, fundamental positions require more patience and time over a long period. But technical positions are most likely to gain rapidly and be identified accurately.

 

FOCUS!

 

If you are in commodity trading for a long time then keep your focus targeted to only one commodity at a time. It’s important to limit your restlessness. If you have decided then stay on one lane, no matter how hard it gets. As said that a person who keeps his legs in two is most likely to fall. 

 

To be a successful commodity trader, focus your heart and mind on only one commodity. This is the most powerful commodity trading strategy. It requires a long-term commitment and loads of patience. 

 

Focus on one commodity and become an expert on it. Do in-depth research of the commodity. You have to learn its past, present and predict the future to your best capabilities. 

 

If you choose more than one commodity at a particular time, without being an expert of the former. You are more likely to get distracted by both. However, if you want diversity then you can choose two commodities of the same field. For example, wheat and soy.

 

Conclusion:

 

There isn’t an official rule to get success, there are just experiences and strategies. Being in complete control and don’t get influenced by news of other traders is one of the most important safety rules of trading in commodities. It’s as uncertain as to the game of cricket. No, it’s the most unpredictable game. Be aware and don’t rely on bookish language.

 

PL Global Impex Ltd is the best commodity trading company.

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