Trading Commodities For Significant Profits

Trading Commodities For Significant Profits

The goal or dream of most market participants, whether they are trading commodities and/or stocks, is to make a lot of money, and possibly trade for a living. This sounds great. You can be your own boss, and make unlimited money. The problem is most people do not realize what it takes to be a consistent winner trading the various markets. It takes years of proper trading education to become proficient. If you want to become elite, you will need to utilize proven strategies, methods, and principles. Solid money management is also crucial, along with the understanding, and proper implementation of trading psychology. The learning curve is steep.

Today, I am writing about the importance of trading a commodity when it's at a strong position. This means the odds are now in your favor, and you are trading with the trend. A strategy I like to implement is a trend reversal one. After a commodity has been in a prolonged price decline, I watch for it to start making higher bottoms. I generally utilize a daily chart for this purpose. After 2 or 3 higher bottoms have been made, and resistance from the top of a previous rally has been crossed, the commodity is now in a strong position to move up in price.

As of this writing, natural gas is a good example of implementing this strategy. Natural gas was in a prolonged price decline from January, 2010, till it bottomed in late October of 2010. After the October bottom, prices rallied, and then declined to a slightly higher bottom in mid November. From that point, the price of natural gas has moved up again, and broke through resistance at the top of a previous rally. This puts natural gas in a strong position for a potential major price movement to the upside. To get a visual of this strategy, use a weekly chart for the prolonged price decline, and a daily chart starting at the October bottom. Learn this strategy, and you could be well on your way to trading commodities for big profits.

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