Commodity Trading Trend Following

A trader must come up with a commodity trading strategy which they stick to when trading the online commodities market. A trader must have the discipline to follow the rules of their commodity strategy at all times. That's why it is best to come up with trade strategies that are profitable - profitable commodity trading systems will be much easier to follow & stick to. This is because a trader knows that by following the rules of their trading system they will be successful.

A carefully designed strategy that has been back-tested & proven to produce profitable trading results is one of the keys to becoming successful when trading the commodities trading market. This type of strategy will make it easier for commodity trader to follow the rules of their commodity strategy because they already know that the trading strategy is profitable, therefore maintaining the discipline to continue following the commodity trading system will be much easier.

Successful commodity trade strategies will also include:

1. Commodity trading money management rules

2.Commodity Trading Psychology Mindset

These 2 will greatly improve the success of any commodities trading system.

However, Let us look at commodity price action strategy before explaining more about commodity money management and psychology.

Commodity Trading Trend Following Strategies

Commodity Trading Trend following strategies are based on first of all determining the overall market trend, whether the commodities trading market is moving upwards or it is moving downwards. After determining the commodities trading market commodity trend the trader will then only open trades in one direction.

Upward commodity trend - in an upward commodity trend commodity prices keep moving up, and here the trader will keep opening buy commodities trades.

Downward commodity trend - in a downward trend commodity prices keep moving down, and here the trader will keep opening sell commodities trades.

There are various strategies of determining the commodities trading market trends and the two most popular ones are:

Commodity Trading Trend lines - traders will draw commodity trend line on the commodity price chart to determine the current general market movement. Once the commodity trend direction is determine a trader will then open commodities trades once the commodity price touches the trend line or when price is close to the trend line. The trader will only open trades in the direction of the trend.

When markets form trends, the commodity trend will have a lot of momentum and this momentum will mean that the commodity prices will keep moving in that direction for a period of time that lasts for quite some time.

Trading the commodity trend is one of the most profitable way to trade the commodities trading market if a trader catches a commodity trend that has already formed they can make a lot profit just by trading in the direction of the trend and the longer the commodity trend stays the longer a trader can continue to make profits. Some major commodity trend might last for years & these can prove to be the most profitable trading setups especially when they last for years.

Moving Averages Strategies - Another commodity trend identification strategy is the use of the 20 day moving average, and when prices are above this moving average the commodities trading market is bullish and if commodity prices are below this moving average the commodities trading market is bearish.

The 50 day moving average is also used for determining the medium term commodity trend, while the 200 day moving average is used to determine the long term commodity trend of the commodities trading market.

Traders can also use two moving averages to form the moving average cross-over method, this technique will have a shorter period moving average and a longer term moving average and these two will be use to determine the current market trend. For example a trader can use the 5 day & 7 day moving averages, & for this strategy the commodity trend is upwards if both these moving averages are heading in the upward direction & the commodity trend will be down if both these two moving averages are heading downward.

This system will indicate the commodity trend is about to change one these two line cross over each other. This signal will be a god time to close trades if a trader has open trades.

Commodity Trading Strategies Tips

Once a trader has come up with their commodity strategy, they should also include the following so that to make their commodity trading strategy more successful.

1.Commodity Money Management Rules Guide.

2.Commodity Trading Psychology

Commodities Money Management Guidelines

Commodity trading money management rules should be part of your commodity strategy - these rules will help you as a trader to manage risk. This means that you will use two rules of commodity trading money management - these are risk:reward ratio & drawdown reducing method when placing your commodities trades to determine the lot size that you will open in the commodities trading market. The most popular commodity trading money management rule use in commodities trading & the one that you should also add to your trading plan is the rule which says a trader should never risk more than 2% of account balance on any one single commodity trade.

To know more about these two commodity trading money management rules, traders should read the commodity trading money management guide that is on the learn commodity lessons section of this website under the commodity trading key concepts lessons.

Commodity Trading Psychology Mindset

In order to become successful when trading the commodities trading market a trader has to learn about commodity trading psychology. The commodity psychology or mindset that's required to become successful in commodity trading is one that avoids the emotions of fear and greed while trading the commodities trading market & is a mindset of total discipline that a trader will follow all their trading rules & their commodity trading strategy & only trade with trading signals that are generated by their commodity trading strategy. With discipline a trader will not trade unless their commodity trading strategy gives a trading signal. A trader will have the mindset of only following their commodity system 100% all the time without second guessing the commodities system. A disciplined trader will also not place trades in the commodities trading market just because the commodities trading market has started to move up or downward, instead a trader will wait for a signal to trade to be generated by their commodity trading strategy.

In order to learn more about commodity trading psychology & how to manage emotions while trading the online commodity market a trader can read the commodity trading psychology tutorials from learn commodity lessons section of this website under the commodity trading key concepts courses.