How to Trade Commodities (Intraday)
Time frame: we can divide Indian commodities market into 2 sessions, first from 10:00am to 6pm then second is after open international market from 6:00pm to end of the day. Most of the time from 10 am to 6pm, commodities market is range bound and after 6pm its show big reversal movement. After 6:30 pm, trading in commodities with small SL for big target is very useful.
News: News in commodities trading is very important. Commodity trading is based on international news because direction of trend can find by the international news and price only but this is always a headache for trader. There is a lot of news about commodities in international market, which is useful and which is not useful. Some time trader miss basic news also and some time he collect too much useless news from internet like he is not intraday trader but want to buy commodities for future requirement of his project in physical form so now hedging them. Most of commodities trader even earning good profit from it by intraday or positional trades also don’t know that why the commodity Exchange and how it works in real. Just on business news channel at 10 am and 6pm, there you can find commodities news. There you can find all necessary news about commodities. Its more than enough for intraday trading.
Chart Setup and Read: Just open chart of commodity, there should be Price and Volume panel on chart. Apply ATP in the chart. ATP is most important factor in commodities. You can add pivot level also in it. Always watch volume part of chart. Please don’t make your chart to drawing sheet by add a lot of indicators and draw straight, right, left, horizontal, vertical. Up, down 100-200 lines in chart name of so called xyz strategy and analysis then you can’t see proper price also.
Find the opportunity for LONG and SHORT: Always LONG the strong commodities and SHORT the weak commodities.
Strong Commodity:
Buyers are more than Sellers
Percentage change is more than +0.5%
Sustain above the ATP
Any positive breakout at Historical chart can also confirm.
Weak Commodity:
Sellers are more than Buyers.
Percentage change is more than -0.5%
Sustain below the ATP
Any Negative breakout at Historical chart can also confirm.
Trading Methods:
ATP Respect: ATP plays a major role in commodity trading. ATP works as a support and resistance level for commodity. If any commodity is strong then ATP works as a support level for it. When it’s come to near ATP then most possible it will respect the ATP and will start raise from here. You can buy it near ATP and just put the SL slightly below the ATP. So your SL will small and Target will be big.
Similarly with weak commodity, ATP works as a resistance for weak commodity. When it’s come to near ATP then most possible it will fail to break ATP level and again start down side. So you can short it near ATP level and put SL just slightly above the ATP. So your SL will small in respect to target.
ATP Crossover: When a reversal come in market and commodity break the ATP as support or resistance level then it’s known as ATP crossover. When any commodity cross the ATP then most possible it will show any big movement. If any strong commodity show reversal and break the ATP as support then you can sell it when its break the ATP level and put the SL slightly above the ATP. So your SL will small and Target will be big.
Similarly, if any weak commodity show reversal and break the ATP as resistance then you can buy it above the ATP level and put SL slightly below the ATP. So your SL will small and Target will be big.
Cage Strategy: Cage strategy is most powerful in commodity trading. In cage strategy, kept open a Buy order above the high and Sell order below the low. When a commodity break the high or low level then most possible its make the new big high and low. When a order execute in the Cage strategy, Just place SL slightly below the previous high for buy order and slightly above the previous low for executed sell order. So your SL will small and Target will be big.
There are some tricks that you can use for make more winning chance in above methods but you should some practice before apply it.
Double Stop Loss order: In this trick, we shall add double quantity in our SL order for above strategy. So when our SL will hit then with half quantity our open position will square off and with rest half quantity we can get profit and recover our loss what we made by SL hit.
Like if crude oil is strong and we bought 1 lot crude oil near the ATP with 2 Lot stop loss just slightly below the ATP. Suddenly crude oil shows the reversal and its break the ATP. We had 2 lot SL orders, so with 1 lot our buying position will square off and another 1 lot will short and it will start generate profit for us. Crude oil break the ATP so most possible it will show big movement because it’s broke the important ATP levels. So with this extra lot profit we can recover our loss what he made with SL hit. If there is any big downside then we can generate extra profit also after recover loss with SL hit one lot. For like this trick, you should have good practice.
Add Extra Lot near Stop Loss: In this trick, we add extra lot with same stop loss. Like we have bought 1 lot crude oil at 3250 with 3240 SL. If crude oil now starts to down side and its come near to our stop loss then we can add one more lot of crude oil at 3248 levels with same 3240 SL. If its hit stop loss then loss will be very small for extra add one lot but if its respect our SL level and its start to raise without hit our SL then we will have 2 lot and our avg. buying price will also reduce so our profit will more and we can get exit with profit. For like this trick, you should have good practice.
Hedging Technique:
There are some hedging technique also, its sound good in theoretical but practically it’s not good bet. I am just sharing with you.
Pair Hedging: In pair hedging, we buy strong commodity and sell weak commodity from the same sector or different sector at the same time. It’s on possibility that at least one will hit target but some time both hit SL then add brokerages and tax, it’s become more worst.
Same Commodity with different months: In this, we buy one month and sell next month same commodity same the time with very small SL. So if commodity raise or fall, we can get that movement. Its sound good as theoretically but in this surety that one side SL will hit, so after cut one side SL and both sides brokerages and taxes, there is very small profit remain that also if its show any big movement. If fail to show big movement then it can be in loss also. Some time both SL hit and big loss. So it should be avoid if you are not familiar like this technique.
This is all about intraday trading in commodities. What should you have to know about practically intraday trading in commodities is described here. You can read many books and join many online and offline courses about intraday trading in commodities, they will tell you round-round many things to impress but finally for earn profit in real practically intraday commodities trading, this one only possible methods. You should have good practice. You can practice at least one month with this and can see result. You will do many mistakes. No problem, mistakes are part of learning. You should identify that mistakes and remove them one by one. I can identify also what mistakes and problems you will face during this learning:
1. You can’t mange Stop Loss, some time your SL will very small so it will hit very early. Some time your SL will very big so after reversal trend start also it will take time to hit and you will loss big in SL hit.
2. You can’t determine target, some time you will book your profit very early. Some time your target will very high so it will reverse and hit your SL before hit your target even you were in profit at a time.
3. You can’t identify the reversal and you will trap in it and your SL will hit.
4. Near the ATP support or resistance, ATP crossover, cage strategy and some important levels and impulse buy and sell will generate, you will identify it wrongly and will trap in it and your SL will hit.
You should not worry about it. It’s all part of learning. You have to learn from it. After some practice you will get maturity and you can easily identify like this situation and can easily avoid like this mistakes. Then also a small probability will always there for mistakes and you should accept it with SL. You can paper trade or can trade with mini lots or not trade also; it’s all your choice. There is no force for learn.
Mostly time commodities show big movement after 6:00 pm (after international market open) but menthe oil can show big movement in day time also. Nickel is a naught commodity; it can give surprise with sharp big movement either bull or bear side any time of day, so keep aware about it. Commodities show sharply big movement in one direction so doesn’t trade with commodities without stop loss. Don’t keep SL in your mind always put your SL in terminal otherwise everything will remain in your mind and you will not able to do anything.
News: News in commodities trading is very important. Commodity trading is based on international news because direction of trend can find by the international news and price only but this is always a headache for trader. There is a lot of news about commodities in international market, which is useful and which is not useful. Some time trader miss basic news also and some time he collect too much useless news from internet like he is not intraday trader but want to buy commodities for future requirement of his project in physical form so now hedging them. Most of commodities trader even earning good profit from it by intraday or positional trades also don’t know that why the commodity Exchange and how it works in real. Just on business news channel at 10 am and 6pm, there you can find commodities news. There you can find all necessary news about commodities. Its more than enough for intraday trading.
Chart Setup and Read: Just open chart of commodity, there should be Price and Volume panel on chart. Apply ATP in the chart. ATP is most important factor in commodities. You can add pivot level also in it. Always watch volume part of chart. Please don’t make your chart to drawing sheet by add a lot of indicators and draw straight, right, left, horizontal, vertical. Up, down 100-200 lines in chart name of so called xyz strategy and analysis then you can’t see proper price also.
Find the opportunity for LONG and SHORT: Always LONG the strong commodities and SHORT the weak commodities.
Strong Commodity:
Buyers are more than Sellers
Percentage change is more than +0.5%
Sustain above the ATP
Any positive breakout at Historical chart can also confirm.
Weak Commodity:
Sellers are more than Buyers.
Percentage change is more than -0.5%
Sustain below the ATP
Any Negative breakout at Historical chart can also confirm.
Trading Methods:
ATP Respect: ATP plays a major role in commodity trading. ATP works as a support and resistance level for commodity. If any commodity is strong then ATP works as a support level for it. When it’s come to near ATP then most possible it will respect the ATP and will start raise from here. You can buy it near ATP and just put the SL slightly below the ATP. So your SL will small and Target will be big.
Similarly with weak commodity, ATP works as a resistance for weak commodity. When it’s come to near ATP then most possible it will fail to break ATP level and again start down side. So you can short it near ATP level and put SL just slightly above the ATP. So your SL will small in respect to target.
ATP Crossover: When a reversal come in market and commodity break the ATP as support or resistance level then it’s known as ATP crossover. When any commodity cross the ATP then most possible it will show any big movement. If any strong commodity show reversal and break the ATP as support then you can sell it when its break the ATP level and put the SL slightly above the ATP. So your SL will small and Target will be big.
Similarly, if any weak commodity show reversal and break the ATP as resistance then you can buy it above the ATP level and put SL slightly below the ATP. So your SL will small and Target will be big.
Cage Strategy: Cage strategy is most powerful in commodity trading. In cage strategy, kept open a Buy order above the high and Sell order below the low. When a commodity break the high or low level then most possible its make the new big high and low. When a order execute in the Cage strategy, Just place SL slightly below the previous high for buy order and slightly above the previous low for executed sell order. So your SL will small and Target will be big.
There are some tricks that you can use for make more winning chance in above methods but you should some practice before apply it.
Double Stop Loss order: In this trick, we shall add double quantity in our SL order for above strategy. So when our SL will hit then with half quantity our open position will square off and with rest half quantity we can get profit and recover our loss what we made by SL hit.
Like if crude oil is strong and we bought 1 lot crude oil near the ATP with 2 Lot stop loss just slightly below the ATP. Suddenly crude oil shows the reversal and its break the ATP. We had 2 lot SL orders, so with 1 lot our buying position will square off and another 1 lot will short and it will start generate profit for us. Crude oil break the ATP so most possible it will show big movement because it’s broke the important ATP levels. So with this extra lot profit we can recover our loss what he made with SL hit. If there is any big downside then we can generate extra profit also after recover loss with SL hit one lot. For like this trick, you should have good practice.
Add Extra Lot near Stop Loss: In this trick, we add extra lot with same stop loss. Like we have bought 1 lot crude oil at 3250 with 3240 SL. If crude oil now starts to down side and its come near to our stop loss then we can add one more lot of crude oil at 3248 levels with same 3240 SL. If its hit stop loss then loss will be very small for extra add one lot but if its respect our SL level and its start to raise without hit our SL then we will have 2 lot and our avg. buying price will also reduce so our profit will more and we can get exit with profit. For like this trick, you should have good practice.
Hedging Technique:
There are some hedging technique also, its sound good in theoretical but practically it’s not good bet. I am just sharing with you.
Pair Hedging: In pair hedging, we buy strong commodity and sell weak commodity from the same sector or different sector at the same time. It’s on possibility that at least one will hit target but some time both hit SL then add brokerages and tax, it’s become more worst.
Same Commodity with different months: In this, we buy one month and sell next month same commodity same the time with very small SL. So if commodity raise or fall, we can get that movement. Its sound good as theoretically but in this surety that one side SL will hit, so after cut one side SL and both sides brokerages and taxes, there is very small profit remain that also if its show any big movement. If fail to show big movement then it can be in loss also. Some time both SL hit and big loss. So it should be avoid if you are not familiar like this technique.
This is all about intraday trading in commodities. What should you have to know about practically intraday trading in commodities is described here. You can read many books and join many online and offline courses about intraday trading in commodities, they will tell you round-round many things to impress but finally for earn profit in real practically intraday commodities trading, this one only possible methods. You should have good practice. You can practice at least one month with this and can see result. You will do many mistakes. No problem, mistakes are part of learning. You should identify that mistakes and remove them one by one. I can identify also what mistakes and problems you will face during this learning:
1. You can’t mange Stop Loss, some time your SL will very small so it will hit very early. Some time your SL will very big so after reversal trend start also it will take time to hit and you will loss big in SL hit.
2. You can’t determine target, some time you will book your profit very early. Some time your target will very high so it will reverse and hit your SL before hit your target even you were in profit at a time.
3. You can’t identify the reversal and you will trap in it and your SL will hit.
4. Near the ATP support or resistance, ATP crossover, cage strategy and some important levels and impulse buy and sell will generate, you will identify it wrongly and will trap in it and your SL will hit.
You should not worry about it. It’s all part of learning. You have to learn from it. After some practice you will get maturity and you can easily identify like this situation and can easily avoid like this mistakes. Then also a small probability will always there for mistakes and you should accept it with SL. You can paper trade or can trade with mini lots or not trade also; it’s all your choice. There is no force for learn.
Mostly time commodities show big movement after 6:00 pm (after international market open) but menthe oil can show big movement in day time also. Nickel is a naught commodity; it can give surprise with sharp big movement either bull or bear side any time of day, so keep aware about it. Commodities show sharply big movement in one direction so doesn’t trade with commodities without stop loss. Don’t keep SL in your mind always put your SL in terminal otherwise everything will remain in your mind and you will not able to do anything.
