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Fundamental book on commodities trading

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Hi @zala,

This is a good resource, a by country crop rotations calendar,

http://www.amis-outlook.org/fileadmin/user_upload/amis/docs/resources/AMIS-online-crop-calendar_REDUCED3.pdf 

And then if you compare that to the regular updates on twitter by Ole Hansen on current crop conditions/potential yields/harvest times etc you may very well get an insight into future prices. Best of luck.

ole1.PNG.0c1908d20672973b3de5870d84150215.PNG

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Trading commodities is difficult at the best of times. I am not suggesting fundamentals are not important but for me trading with the trend is one of the most important things in commodities trading.

  • El Nino (Extreme Weather Conditions) can affect commodity prices
  • Speculators can affect commodity prices.
  • Bad harvests can affect commodity prices.
  • Excessive demand can affect commodity prices.
  • Limited supply can affect commodity prices.
  • Excessive supply can affect commodity prices.
  • Limited demand can affect commodity prices.
  • Economic / political factors can affect commodity prices.

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@zala, have a look at some of my threads and posts in the Commodities section if you are interested. You will see that most of my posts within the threads are based around price action and the behaviour of the asset price. I do look at fundamentals in the sense of understanding why the asset price is moving the way it is. What is the reason behind the move and what story the price action is trying to tell.

I think if you just pick a few commodities that really interest you in terms of trading. Don't pick too many but just a couple of even one. Then just follow the price action daily. Follow it on your phone, follow it at home on your desktop. Follow it in the lounge on your tablet. 

TrendFollower Tip: Identify a commodity which breakouts to the upside to keep things nice and simple. Maybe it has gone above its 20 day moving average. Look for one that you can trade with the trend and that the balance of probability and odds of success are in your favour. At the same time research online to see why the move is occurring. Start of with a small allocation of capital to the trade. Don't worry about making a loss or failing. Get a feel and live and breathe the commodity you are trading. Remember set a stop loss so you know your exit price and maximum loss before you even enter the trade. Once in profit then set a trailing stop. Do not exit unless there is a clear trend reversal. If the price keeps going up then think about adding to your position. This is the best learning. If the trade fails and you make a loss then learn why you think the trade went against you? What could you have done differently. If you cannot identify a trade then do not enter open a position. Wait patiently until a trend emerges in a commodity that you feel comfortable trading. 

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6 minutes ago, TrendFollower said:

@zala, have a look at some of my threads and posts in the Commodities section if you are interested. You will see that most of my posts within the threads are based around price action and the behaviour of the asset price. I do look at fundamentals in the sense of understanding why the asset price is moving the way it is. What is the reason behind the move and what story the price action is trying to tell.

I think if you just pick a few commodities that really interest you in terms of trading. Don't pick too many but just a couple of even one. Then just follow the price action daily. Follow it on your phone, follow it at home on your desktop. Follow it in the lounge on your tablet. 

TrendFollower Tip: Identify a commodity which breakouts to the upside to keep things nice and simple. Maybe it has gone above its 20 day moving average. Look for one that you can trade with the trend and that the balance of probability and odds of success are in your favour. At the same time research online to see why the move is occurring. Start of with a small allocation of capital to the trade. Don't worry about making a loss or failing. Get a feel and live and breathe the commodity you are trading. Remember set a stop loss so you know your exit price and maximum loss before you even enter the trade. Once in profit then set a trailing stop. Do not exit unless there is a clear trend reversal. If the price keeps going up then think about adding to your position. This is the best learning. If the trade fails and you make a loss then learn why you think the trade went against you? What could you have done differently. If you cannot identify a trade then do not enter open a position. Wait patiently until a trend emerges in a commodity that you feel comfortable trading. 

@TrendFollower

I am an avid reader of your threads as you seem to know your stuff. However, I am way more fundamentally oriented and use volatility based stops as an e.g. and fundamentals for entries of specific asset classes.

Usually I always check tradingeconomics.com for trading macroeconomical/fundamental indicators as to gauge how the economies are doing for the underlying assets that I trade, in this case usually indices such as the SP500.

I follow the inbuilt Reuters feed that IG added into the new platform - an excellent feature and my compliments to the development team that it added them.

My aim is to try to get a top-down view of commodities markets, with preferably a site where I can see - all- the important fundamental parameters/indicators for commodities, like tradingeconomics.com but for commodities.

The inbuilt feed provides live updates, but it'd be very nice to have it visually displayable how reports change from date to date like it is shown in tradingeconomics.com.

@Caseynotes suggestions are excellent, and it is exactly for that type of information I am looking for. 
Currently I am in the dark as to what indicators are the most important fundamentally for various commodities whereas I am very well versed when it comes to indices.

 

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@zala,  just to add, Ole Hansen not only gives regular crop condition updates on twitter but also puts out webinars on all commodities giving insight to short term potential moves. He is chief commodities analysis at Saxo Bank so well worth finding him and his webinars on their web site.   

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3 minutes ago, Caseynotes said:

@zala,  just to add, Ole Hansen not only gives regular crop condition updates on twitter but also puts out webinars on all commodities giving insight to short term potential moves. He is chief commodities analysis at Saxo Bank so well worth finding him and his webinars on their web site.   

Thank you, i'll look into him further.

I forgot to mention that I look at COT-data for each asset class too, especially commodities.
But are there any summarizes for important reports/indicators to look at?

I am really aiming to create a structure around the vastness of the information out there.
Your crop chart is excellent.

Trading indices my structure looks something like this;

1. Are we in earnings-season, January, April, July, October? If not, markets react more on geopolitical developments and on macroeconomic data. If yes, then its more fundamentally oriented and surrounds EPS.

2. Economic calendar, and the reading of the ViX. A higher volatility environment means a lot of news is hitting the markets, and thus wider stops. A lower ViX means that the markets are trending upwards.  I usually check tradingeconomics.com for this.

3. Geopolitical developments. Elections, regulatory changes, and black-swan-events etc are used by checking Reuters, Bloomberg, Financial Times e.g. These are often more predominant factors that weigh on markets when there is very little fundamental news.

That is a rough picture of how I trade.
Currently I have ventured into commodities as indices show little trending movements due to the uncertainty with the trade wars.

I however do not have the framework as I do in trading indices when it comes to commodities, so all information is quite new and I am constantly trying to sort out and determine what is important and what isn't.

 

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@zala, yes, a very good idea to look at it systematically especially so with commodities as they are so very cyclic in nature. I don't know any texts off hand that breaks down the particular cycles for all commodities, obviously softs have their harvest supply/demand peaks and troughs for example the timing for which is in the calendar (linked in post above), then on top of that knowing what is early/late, poor or bountiful is going to be very useful price sensitive information. I'll keep an eye out.

As you mentioned COT Ole Hansen also does a weekly run down of the latest cot report with particular emphasis on commodities which is also on the Saxo web site, if you follow him on twitter he will always post a link to it on Mondays.

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@zala, I trade commodities but only when the opportunity arises or is presented. Otherwise I am happy to stay on the sidelines and wait patiently for such opportunities. Recent commodity opportunities have been in the likes of Carbon Emissions, Lumber, Orange Juice, etc. 

I don't tend to go into the sort of fundamental analysis you are looking for as my decisions are based purely on price action (technicals) with fundamentals there just to support and understand the trade better. Price action alone determines my entry and exit into the trade. 

In my experience the commodites market does not always move in sync with fundamental news released by the media. I will be interested to see how your approach fares with information (parameters / indicators). Does this improve your chances of success? On the face of it, your chances should improve. I will be interested in whether it does in reality.

It is very good to be thorough and to research your asset class before trading which is what you seem to be doing. That seems a very sensible start. 

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