How to Choose a Commodity Trading Moving Average to Trade With
Choose a Moving Average to Trade With Commodity Trading Strategies
A commodity trader can choose a moving average based on the commodities chart time frame that he is trading; the commodity trader might choose to use this Moving Average indicator on the minute commodity charts, hourly commodity charts, day commodity charts or even weekly commodity charts.
The commodity trader can also choose to average the closing commodities price, opening commodities price or median commodities price.
Moving average commodity indicator is a commonly used indicator to measure strength of commodity trends. The data is precise and its output as a moving line can be customized to a commodity trader's preferences.
Using the commodity moving average is one of the basic ways to generate commodity buy and sell trading signals which are used to trade in the direction of the commodity trend, since the Moving Average indicator is a lagging indicator and a commodity trend following indicator - this means that it will tend to give late commodity entry signals as opposed to leading commodity indicators. However, as a lagging commodity indicator it gives more accurate commodity signals and is less prone to whipsaws compared to leading commodity indicators.
Commodities Traders choose the moving average period to use depending on the type of commodity trading they do: short-term commodity, medium-term commodity and long-term commodity.
- Short-term commodity trading: 10 - 50 MA Period
- Medium-term commodity trading: 50 - 100 MA Period
- Long-term commodity trading: 100 - 200 MA Period
The commodities price period in this case can be measured in minute commodity charts, hourly commodity charts, day commodity charts or even weekly commodity charts. For our example we will use 1 hour commodity chart time frame period.
Short term commodity moving averages are sensitive to commodities price action and can spot commodity trends signals faster than the long term moving averages. Shorter term commodity moving averages are also more prone to whipsaws compared to long term moving averages and a commodity trader should choose a commodity price period that will generate a commodity signal early but not give too many commodity whipsaws.
Long term commodity moving averages help avoid commodity whipsaws, but are slower in spotting new commodity trends and commodity trend reversals.
Because long term moving averages calculate the average using more commodities price data, it does not reverse as fast as a short term commodity moving average and it is slow to catch the changes in the commodities trend. However, the longer term commodity moving average is better when the commodity trend stays in force for a longer time but may also give late commodity signals.
The work of a commodity trader is to find a moving average period that will identify commodity trends as early as possible while at the same time avoiding fake-out signals (commodity whipsaws).
