Commodity trading charts:
Commodity trading charts are just as essential to an investor, as maps are to a ship’s navigator. Commodities move in trends, just like ocean |
Technical analysis has become the primary tool for charting shorter-term price movements, and setting stop loss and profit targets, since it applies only to the price action of the market. But before you ignore the longer-term fundamental factors in your commodity trading charts (since there seems to be an “either or” mentality among some traders), keep in mind that we live in an emotional world. Greed and fear play a role in commodity activity and will impact the overall effectiveness of your trading charts.
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When working on your futures charts, don’t shy away from using a combination of both fundamental and technical analyses to chart your trends. The fundamentals will tell you what to buy or sell through past performance and the technical analysis will give you the when.
Determining "support" and "resistance" levels is one purpose of your Commodity Trading Charts. The basic premise of Support and Resistance Levels is that the market tends to trade above its support levels and trade below its resistance levels. Look at your futures chart and find where the market has had unbroken support or resistance in the past. Then look for the breaks in support or resistance and anticipate that the market will continue in the break direction.
Another charting method involves predicting price movements based upon repeating patterns involving mass psychology and group behavior. If money is made in the market by buying low and selling high, then you are simply attempting to “predict” when that high will come, and this method is as good as any.
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Commodity trading charts:
Gaps, spikes, and wide-range bars
Some trading chart patterns consist of gaps, wide-range bars, reversal days, and spikes. These patterns usually represent short-term, intense price movements and volatility. A gap forms an open vertical space between bars on your trading chart. A gap occurs when today's low price is higher than yesterday's high price or vice-versa, and can evidence either a strong trend or price exhaustion at the end of a trend.
The idea that "Gaps are meant to be filled" is not always true. Trading charts are full of gaps that have never been filled. That said, look carefully at very large gaps, or successive gaps on your trading chart, they often accompany extreme price moves.
Spikes on your futures chart are price bars that extend much higher or lower than surrounding price bars. Where a Spike occurs in the trend is important. It may be just be a temporary price spike due to favorable or unfavorable news. However, when a spike occurs on the chart after an extended trend, it can be a sign of a price extreme, or a signal of price exhaustion.
Wide-Range Bars is a spike on your trading chart followed by subsequent up bars with a significantly larger range than preceding bars.
A Reversal Day occurs when a commodity makes a new high and then reverses to close below the previous day's close. This can indicate a shift in market sentiment or perhaps a sign of trend exhaustion.
It is important to note that commodity trading charts are composed of a number of analyses and that no one indicator can or should stand alone. Just as importantly, when several patterns converge at the same time on your trading chart, they can signal a potential reversal or swing.
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Online Commodities Trading...do your contracts have bright futures?
Trading futures online can be complicated. Here are some tips, techniques, and training to improve your trading methods and profits.
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