How to Read a Commodities Trading Chart
When it comes to trading the commodity market the commodities chart is the basic trading tool used by all traders. The commodity chart will show information about a commodity instrument - the commodities chart will show the general direction of commodities prices, the chart will also show the current price of a commodities and the chart will also show historical movement of chart commodities prices.
Traders will use these charts to determine where to place trades. From the chart the trader will analyze the commodity market movements using technical indicators so as to determine the direction of the market and determine the trade to open.
Traders must therefore learn how to use commodity charts before they can start transacting in the online commodities market.
The following are the various things that a trader will need to know about commodities charts.
Types of Charts
There are three types of commodities charts
Line Commodities Trading Chart - this charting method draws a continuous line that connects the closing commodities prices. For example if a trader is using the 5 minutes chart then this line commodity chart will draw a continuous line that connects closing commodities price of the commodity market after every 5 minutes.
Bar Commodity Trading Chart -This chart use bars to represent commodities price movements, and plots OHCL -Opening commodities price, High, Low, & Closing commodities price for that period, for example if the period used is 5 minutes, the bar will represent the commodities price data and the OHCL points for the 5 minutes.
Candlestick Commodity Trading Charts -The are the most popular chart types as they are the most visually appealing and they represent the commodities price movements in an easily identifiable way which clearly show when a market moves up or when it moves down using different colors to differentiate the direction. These candlestick commodity chart look like a candle and they have a body that resembles the wax part of a candle and an upper and a lower poking line that resembles the wick of a candle.
Commodities Trading Chart Periods -Chart Time Frames
A commodity chart will draw charts based on different time periods - these are 1 minute, 5 minute, 15 minute, 1 hour, 4 hour, 1 day, 1week and 1 month. The period used to draw chart data is also known as a commodity chart time frame, for example the 5 minute chart period is commonly referred to as the 5 minute commodity chart by trader. This 5 minute chart time frame will represent data for the five minutes of trading, after those five minutes another set of data will be used to draw another chart representation. For examples if a trader is using candlesticks commodity chart, the data of one candlestick will draw data of that five minutes, after those five minute another candle will be drawn using commodities price data of the next five minutes - when these candlesticks are combined they then make a graph representation that shows the general direction of commodities prices commonly known as the trend. Commodities traders can then use this information to make trading decisions.
Because the most commonly used charts are candlesticks commodity charts we shall discuss how to read commodity charts specifically candlestick commodities charts.
How to Use Candlestick Commodities Trading Charts
The candlestick commodity charts uses candle that have different colors to represent different commodities price moves, blue candles show commodities prices closed higher than they opened, red candlesticks show commodities prices closed lower than they opened. This color representation is then used by commodities traders to determine when commodities price has moved up or down.
The candles also show OHCL:
O - Opening Commodities Price
H - Highest Commodities Price
C - Closing Commodities Price
L - Lowest Commodities Price
These commodities price points are represented using a formation that looks like a candlestick, the distance between the opening commodities price and closing commodities price is represented by what is known as body, this part resembles the wax part of a candlestick. High commodities price is represented by a poking line protruding upwards, this line resembles the wick of a candlestick, the low commodities price is represented by a poking line protruding downwards & it also looks like a candlestick wick facing down.
Candlesticks
A trader can also add a commodity indicator on the commodities chart so that they can interpret the chart market using these indicators. Commodities traders will need to place indicators on the commodity so that they can get additional information about a commodity trend & therefore be in a better position to make a more informed trading decision. These technical indicators can be used to predict the likely market direction that the commodity market is likely to keep moving in whether up or down.
A trader can use indicators such as the moving averages and Bollinger to determine the trend. Commodities traders can also use other indicators such as the RSI and stochastic oscillators to determine when to open trades.
Commodities Trend lines are also used to determine the direction of the candlestick commodity charts trends and these lines can drawn on the charts to show this direction. A commodity upwards trend will be shown by a commodity trend line is moving up while a commodity trend that is moving down will b e shown a commodity trendline which is moving downward.
To learn how to draw a commodity trend line and how to trade using technical analysis a trader can learn about the commodity trend line lesson under the learn commodity lessons section of this website, for indicators a trader can learn about commodity indicators & their technical analysis on the commodity indicators section of this site.
