Learn Commodities Trend Following Strategies
A trader must create a commodity strategy that they stick to when trading the online commodities market. A trader must have the discipline to follow the rules of their commodity strategy at all times. That is why it is best to come up with trading strategies that are profitable - profitable commodity systems will be a lot easier to follow & stick to. This is because a trader knows that by following the rules of their commodity system they will be successful.
A carefully designed trading strategy which has been back-tested and proven to produce profitable trading results is one of the keys to becoming successful when trading the commodities market. This type of strategy will make it easier for commodity trader to follow the rules of their commodity strategy because they already know that the strategy is profitable, therefore maintaining the discipline to continue following the commodity system will be much easier.
Successful commodity strategies will also include:
1. Commodities money management guidelines
2.Commodity Trading Psychology Mindset
These 2 will greatly improve the success of any commodities trading system.
However, Let us look at commodities price action strategy before explaining more about commodity money management and commodity psychology.
Commodities Trend Following Strategies
Commodities Trend following strategies are based on first of all determining the overall market trend, whether the commodity market is moving upwards or it is moving downwards. After determining the commodity market commodity trend the trader will then only open trades in one direction.
Upward commodity trend - in an upward commodity trend commodities prices keep moving up, and here the trader will keep opening buy commodities trades.
Downward commodity trend - in a downward commodity trend commodities prices keep moving down, and here the trader will keep opening sell commodities trades.
There are various strategies of determining the commodity market trends and the two most popular ones are:
Commodities Trend lines - traders will draw commodity trend line on the commodities price chart to determine the current general market movement. Once the commodity trend direction is determine a trader will then open commodities trades once the commodities price touches the commodity trend line or when commodities price is close to the commodity trend line. The trader will only open trades in direction of the trend.
When markets form trends, the commodity trend will have a lot of momentum and this momentum will mean that the commodities prices will keep moving in that direction for a period of time that lasts for quite some time.
Trading the commodity trend is one of the most profitable way to trade the commodity market if a trader catches a commodity trend that has already formed they can make a lot profit just by trading in direction of the commodity trend and the longer the commodity trend stays the longer a trader can continue to make profits. Some major commodity trend might last for years & these can prove to be the most profitable setups especially when they last for years.
Moving Averages Strategies - Another commodity trend identification strategy is the use of the 20 day moving average, and when commodities prices are above this moving average the commodity market is bullish and if commodities prices are below this moving average the commodity market is bearish.
The 50 day moving average is also used for determining the medium term commodity trend, while the 200 day moving average is used to determine the long term commodity trend of the commodities market.
Traders can also use 2 moving averages to form the moving average cross over technique, this technique will have a shorter period moving average & a longer term moving average & these 2 will be use to determine the current market trend. For examples a trader can use the 5 day and 7 day moving averages, & for this strategy the commodity trend is upwards if both these moving averages are heading in the upward direction & the commodity trend will be down if both these two moving averages are heading downwards.
This system will indicate the commodity trend is about to change one these two line cross over each other. This signal will be a god time to close trades if a trader has open trades.
Commodity Trading Strategies Tips
Once a trader has come up with their commodity strategy, they should also include the following so as to make their commodity strategy more successful.
1.Commodities Trading Money Management Rules
2.Commodity Trading Psychology
Commodities Trading Money Management Rules
Commodity money management guidelines should be part of your commodity strategy - these rules will help you as a trader to manage risk. This means that you will use two rules of commodity money management - these are risk : reward ratio & drawdown reducing technique when placing your commodities trades to determine lot size that you'll open in the commodities market. The most popular commodity money management rule use in commodity & the one that you should also add to your trading plan is the rule which says a trader should never risk more than 2% of their account balance on any one single commodities trade transaction.
To learn more about these two commodity money management guidelines, traders should read the commodity money management guide that is on the learn commodity tutorials section of this web site under the commodity key concepts lessons.
Commodity Trading Psychology Mindset
In order to become successful when trading the commodity market a trader has to learn about commodity psychology. The commodity psychology or mindset that's required to become successful in commodity is one that avoids the emotions of fear and greed while trading the commodity market & is a mindset of total discipline that a trader will follow all their rules & their commodity strategy & only trade with signals which are generated by their commodity strategy. With discipline a trader will not trade unless their commodity strategy gives a trading signal. A trader will have the mindset of only following their commodity system 100% all the time without second guessing the commodity system. A disciplined trader will also not place trades in commodity market just because the commodity market has started to move up or downward, instead a trader will wait for a signal to trade to be generated by their commodities trading strategy.
In order to study more about commodity psychology and how to manage emotions while trading the online commodity market a trader can read the commodity psychology guides from the learn commodity tutorials section of this web site under the commodity key concepts lessons.
