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Commodity futures traders use different methods to try and predict where the price of a commodity will move. If you have investigated the concept at all, I’m sure you have heard of using “technical analysis” to predict market moves. Technical analysis is the “art” of “reading” a commodity chart for patterns and signals to determine a commodity markets’ future direction.
You can use a commodity chart to easily forecast a potential major move in a commodity market. By trading these big moves you will have a system that is easy to manage because of fewer trades. These trades should also give you bigger gains and fewer losses. And by using a commodity chart, you can easily determine where to enter and exit the trade, and where to place your stops. This article will instruct you on how to use a commodity chart to do all these things.
Forecasting a potential major move in a commodity’s price is easy when you use a commodity chart. Prices are plotted on the chart, which allows you to see price patterns and trends you may not otherwise notice without a commodity chart. Sometimes you will notice a commodity’s price moving in a sideways fashion, like a barrio is keeping the price from going any higher or any lower.
With this type of trend, an obscured pressure will usually start building up, like a coil getting wound tighter and tighter. The longer this trend continues, the greater the potential move is when the price finally breaks free from its’ imaginary barriers. Finding this type of price pattern on a commodity chart is the key to preceding a major commodity price move.
These sideways patterns may only happen a few times a year with each commodity. There will be fewer trades, which means easier manageability of your account and more winning trades instead of loosing ones. The sideways pattern is easy to spot on a commodity chart, so you won’t have to spend more than a few minutes scanning over a commodity chart looking for a trade, leaving you time for other priorities.
When the price finally breaks above or below the barriers, you should enter the trade. You can easily judge your entry point for the trade by looking at the commodity chart. If the price breaks above the top barrier, go long. If the price breaks below the bottom barrier, short it.
A commodity chart also shows you where to place your stops. The commodity’s price will not move in a straight line. It will make little corrections along the way. You can see the corrections as a jagged type of movement on the commodity chart. You should set a stop beneath the last low made before the break up. If it broke down, you should set a stop above the last high made before the break down. As the price continues in an ongoing trend, continue to move your stops in the same direction by using the new highs or lows made by the corrections.
As you follow the price with your stops, you are also establishing your exit point. The price will eventually change direction and when you get stopped out, the trade is over. This is not a rule to break. Moving your stop to try to stay in a trade could cost you a lot. So can re-entering a trade because the price started moving up again, only to suddenly make a drastic drop.
Learning technical analysis and how to read a commodity chart should be any commodity trader’s top priority if they hope to predict and profit from major market moves, and is even more important for more active traders. Of course, technical analysis is more involved than just using the sideways pattern and will involve a bit of study to become proficient at it, but well worth the effort. I anticipate that it is apparent, that a commodity chart really can help you predict and profit from major market moves.
Tony has been an active commodity futures trader for almost a decade, and has become a very accurate grain commodity futures market forecaster by using technical analysis. His website; TheGrainTrader.com, offers tips and help for traders, and his blog is where he regularly posts his market predictions. Go now and see if Tony can help you profit in the commodities market.
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Article added to SearchWarp.com on Saturday, September 29, 2007 View other articles written by Tony Lorenzo(130)
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