As a day trader, you can use many asset classes to make money and grow your portfolio. For starters, commodities and currencies give traders the best opportunities because they are easy to understand and implement without any complicated considerations! Later on, traders may decide to venture into futures and options trading, which can be daunting.
- Focus on fewer commodities
There are approximately 20 more commodities available for traders to trade today. These include gold, silver, soybeans, corn, palladium, and copper. To trade just one of these commodities, you will need to study its dynamics thoroughly. This can take many weeks or even several months for a beginner trader to take their first spin on the market.
- Set up your strategy
You need to have clear parameters that identify your entry and exit points when trading commodities. We recommend you invest time researching technical indicators because they provide traders with the best information - this includes news regarding commodity prices, shifts in supply and demand, and other key data that will make it easier for you to make informed decisions about when to buy and sell.
- Understand the macro
As a currency trader, it's important to track global trends. That way, you'll understand how your job affects macro factors. Here's an example: Individual countries and their central banks can change interest rates to control the economy. When they raise rates, they usually plan to slow growth (by making borrowing more expensive). Suppose this is true globally, and all countries start cutting rates or leaving them off altogether. In that case, commodity costs will plummet because of the wave of cheap borrowing available for investors worldwide.
- Import-Export Driven Countries
Countries in the developed world release their import and export numbers regularly. These numbers can be found on the economic calendar. Traders should carefully assess the information to avoid getting burned on important shifts in currencies and commodities that directly bump up against tangible products that could drive price trends moving forward.
- Research news and relate the commodity to other markets
Before you start day trading a certain commodity, you need to research the trends and fluctuations of the market based on your past experiences. This research should help shed light on what influences the price shift, whether it's good or bad news regarding demand or supply. Take note of how that fluctuating price will affect other markets (if any).
- Link commodities and companies
Commodities are extracted or mined by companies. For instance, BP and Chevron happen to be the leaders in the oil market but are instead considered examples of commodities. As a result of these micro-markets, a trading strategy is possible because if we see an increase in the prices of oil and gas over time, it's likely that we would see an increased demand for investors to invest in this commodity market.
- Trade-in short term
As a day trader, you should avoid holding goods for an extended period. This is because goods in the market always go up and down. The challenge then comes when you have to identify a trend. We generally suggest using a 20-day high or low when identifying a trend. If it's been 20 days since the last drop or rise, it would probably be best to buy or sell goods on hand at around the same time every day during your activity as a trader. Stay away from markets that are currently in consolidation mode.
You can visit our website for more information on day trading commodities. We have various courses where you can learn day trading online and many more.
Source URL : https://www.commoditiesuniversity.com/
