Commodity Trading Price Action 1-2-3 method in the Commodity Trading Market

Commodities Price action is the use of only charts to trade Commodities, without the use of technical chart indicators. When trading with this method, candlestick commodity charts are used. This strategy uses lines and pre-determined patterns such as the 1-2-3 pattern that either develops or series of bars.

Traders use this strategy because this analysis is very objective and allows the one to analyze the commodity market moves based on what they see on the commodities charts and market movement analysis alone.

This strategy is used by many traders; even those that use technical indicators also integrate some form of commodities price action in their strategy.

The best use of this method is achieved when the signals generated are combined with line studies so as to provide extra confirmation. These line studies include commodity trend lines, Fibonacci retracement, support and resistance levels.

Commodity Trading Price Action 1-2-3 Breakout

This strategy uses three chart points to determine the break out direction of a commodity. The 1-2-3 method uses a peak and a trough, these points forms point 1 and point 2, if market moves above the peak the signal is long, if it moves below the trough the signal is to short. The break out of point 1 or point 2 forms the third point.

Series of breakouts

Investors use commodities price action to try and predict where a commodity trend direction might go. The commodity market is either trending or ranging.

A trending market moves in a specific direction while a ranging market moves sideways, normally after hitting a support or resistance level.

Observing the behavior of commodities price action provides this information of whether the commodity market is trending or ranging or reversing its direction.

As with any other Commodity Trading strategy this method should also be combined with other confirming indicators to avoid whipsaws. The 1-2-3 pattern can give good signals in a trending market but will give whipsaws when the commodity market is ranging, it is best to determine if the commodity market is trending or not before you start using this strategy.

Combining This Strategy With other Indicators

Good indicators to combine with are:

• RSI

• Moving Average

Investors should use these two indicators to confirm if the direction of breakout is in line with the commodity trend direction shown by these two indicators. If the direction is also the same as those of these indicators then investors can open a trade in the direction of the signal. If not investors should not open a trade as there is more likely a chance that this commodity signal may be a commodity whipsaw.

Just like any other indicator in Commodities, commodities price action also has whipsaws and there a requirement to use this as a combination with other signal as opposed to just using this strategy alone.

Combining With other Indicators - RSI and Moving Averages