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Charts and technical analysis
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Conan the Farmer
Posted 2/15/2018 22:02 (#6580949 - in reply to #6580559)
Subject: RE: Charts and technical analysis



South Central Iowa

If you are asking what types of analysis we favor, I would say whatever suits you. The same tools can work in any market. There isn't really anything special that works better in commodities.

Commodities are somewhat unique from other instruments. They are largely range bound and would only become worthless under rare circumstances. It's also necessary that there is a short for every long. Unlike a stock, they generally don't go on long trends and double or triple in price. For example: a stock might go from $1 to $30, but a commodity might move from $20 to $23, back to $21, then to $23, then to $20, then to $21, then through $20 and down to $18, then rally to $23, and so on and so forth. Money is made on both sides of the move. The primary purpose of a commodity future is risk management for users and speculative money plays the movement and provides the necessary liquidity that serves to "lubricate" the market. The primary purpose of a stock is to raise funds and serve as a long-term investment vehicle. 

For technical analysis, the most important tools are the ones everyone can see; horizontal lines. In addition, classic charting is the most useful. So in addition to horizontal lines, trend lines and pattern formations are the basics.

Due to the range nature of commodities, I also value retracement tools. I specifically prefer speed resistance lines. When we go up, we will come back down, and when we go down, we will come back up; retracement tools are good for finding points of resistance or support along the way.

But really, whatever works best for you could work in commodities as well. As long as you know that commodities generally aren't an investment vehicle; it's not usually something you put your money in and leave it for years. It moves and requires you to be active and attentive.

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