Use the Relative Strength Index (RSI) to identify overextended markets. However, in commodities, markets can stay "overbought" for a long time during a supply squeeze. Look for bullish/bearish divergences for higher accuracy.
In commodities, stop losses are not guaranteed. Gaps happen. Therefore, your "mental stop" must be 2x wider than your technical stop. If your strategy says stop loss at $1,800, you must have capital to survive a gap to $1,790.
Marcus leaned over two flickering screens in a Chicago loft, the smell of coffee and old risk hanging in the air. For three years, he had traded commodity futures like a gambler pulling a slot machine lever—hoping for crude oil to spike or corn to plummet. He lost more than he won. Higher Probability Commodity Trading- A Compreh...
Never bet against the commercials at extremes. If commercials are adding to shorts at the highs, your technical analysis suggesting "breakout to $100" is likely a trap.
Commodities respect "round numbers" and historical levels where producers find it profitable to sell or hedge. 4. Risk Management: The Secret Sauce Use the Relative Strength Index (RSI) to identify
A trader using this checklist would enter long near $2.85 with a stop at $2.60. By December, NG hit $4.50. That is a 60% return on margin with a 1:4 risk/reward ratio.
A higher probability trader looks at the futures curve before looking at a chart. If you are trading crude oil in steep backwardation, history shows that long positions have a significantly higher probability of success than shorts. In commodities, stop losses are not guaranteed
You must accept that even a perfect setup can fail. Your goal is to execute 100 trades with a positive "Expectancy" (Win Rate x Average Win > Loss Rate x Average Loss). When you stop caring about the outcome of a single trade and start focusing on the process , you’ve reached the professional level. Conclusion