Trading commodities is one of the most demanding types of trading out there. There is a lot of information that you have to take in on a daily basis and you need to look hard for every single piece of news in order to always keep your hand on the pulse.
But before starting trading and before taking in all of the information you need to choose a perfect trading strategy. A strategy that is going to be perfect for you. and there are three main points that you can base your personal strategy on. And here they are.
1. Range trading.
Range trading is one of the most basic types of trading. It involves buying next to the support level and sell as soon the resistance level is approached. It is a prefect strategy for those who can already perfectly well use technical analysis tools like Stochastic Indicators, RSI and other tools that can be in your disposal
Range trading can be a perfect way to make money for those who can see the reverse of the bearish trend. For traders with this knowledge it is also the most profitable strategy of all.
Note that range trading works better with markets which are rarely overbought or oversold as it works better with consistent trends.
2. Trading breakouts.
Even a better level of knowledge of various trading indicators is needed in order to trade breakouts as you are going to have to learn to spot not only the reversal of the trend, but the peak of the reversal and profit off of it. You are going to have to look for the new heights and new lows. That is going to be your meal ticket in case you really feel that this strategy is for you.
Trading breakouts is better for traders who manage a lot of money and who are ready to take a big risk in order to see big wins. What is the logic behind such a strategy? Well, it is quite simple: there can be no flow of the market without breakouts and rapid movements. Market simply needs to see big gains and losses in order to move forward. And that is where we can profit. Simple and obvious.
The only problem with this strategy is the fact that in case market cannot establish strong trends you as trader are going to have a bad time seeing breakouts.
3. Fundamental trading strategy.
While the two strategies that I mentioned before are perfectly well off on their own, none of them can exist without this entry. Fundamental trading strategy take a closer look on supply and demand as the two of them are the key factors in the price forming process. Fundamental strategy also takes into consideration the conditions for every commodity – weather, number of workers, international policies, tariffs and regulations and all of the other factors that can influence the price.
This strategy is clearly not for the beginners as it requires all of the attention to numbers and facts. To put it clear – it requires your whole head to be clear. And that is a massive drawback for it. And also, fundamental trading needs a lot of time to fully unfold and develop. Do you have time and patience for it?