We’ve spend some time lately talking about commodities. Anyone who trades futures on the commodity markets ought to know a considerable amount about what they’re trading. But commodities are not futures.

• Commodities are a class of assets that includes energy, metals, agricultural products, natural gas and oil, and other natural resources. Commodities are natural resources, actual physical objects with an inherent value of their own.
• Futures are investment vehicles through which you invest in commodities. Futures can also be used to invest in other asset classes such as currencies, bonds, interest rates, stocks, indexes, etc. Futures have no value in and of themselves. They are known as derivatives because they derive (or take) their value from the underlying financial instrument (i.e., the commodity, currency, stock, etc.)

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Even when the world is at its most turbulent, commodities provide a safe haven for futures traders. Commodities are inelastic goods. In economics, elasticity quantifies how price changes affect supply and demand.

Elastic goods exhibit a high correlation between price and demand. When the price of the good goes up, demand decreases. Elastic goods are generally less-essential goods, meaning that you can live without them or at least use less of them or substitute a less expensive option. The dance between price and demand can be complex. For example, when the cost of milk rises, people buy less milk and fewer milk products. Some people will stop buying milk altogether until the price comes back down. Families with young children who still need milk will serve their children less milk or milk with a lower fat content and, therefore, cheaper price tag. They may substitute enriched soy milk or calcium supplements and calcium-fortified breads and cereals to ensure their children get a full dose of bone-building calcium. Sales on cheese, ice cream and other dairy products will plummet in concert with how necessary they are perceived to be. Ice cream is considered a luxury so when ice cream prices rise, sales fall. (more…)

We’ve been talking about charting basics lately and the signals charts give the futures trader. But signals are worthless if you fail to act. To be a successful futures trader you must not only know when, but have the courage to act. In futures trading, we call this pulling the trigger. (more…)

In recent posts, we’ve been reviewing essential charting basics for futures traders. Futures traders must have the ability to make decisions quickly. Effective charts provide the futures trader with the information — the trading signals — he needs to make those decisions. It is important for futures traders to be able to read and understand charts at a glance. Particularly when market volatility is high, as it has been recently, futures traders must be able to interpret chart information, read trading signals and act instantly. Savvy futures traders will hone their chart-reading ability in order to take advantage of the valuable trading signals they provide. (more…)

Continuing our blog series on charting basics, today we talk about tails. It is essential for futures traders to be able to read and understand various charting forms and patterns at a glance. The ability to instantly decipher charting information is one of the hallmarks of a successful futures trader. When the market is moving, futures traders must have the ability to make split-second decisions. Successful futures traders learn to read and understand their charts at a glance. In this continuing series, we are explaining charting basics that are important to futures traders. (more…)

We’ve started a blog series on charting basics. Quickly understanding various charting forms and patterns is one of the most valuable skills for futures traders to develop. When you’re trading, you need to be able to decipher as much information from your charts as quickly as possible before you make your trade. If the market is as volatile as it’s been lately, you may have only fractions of a second to make your decision. Successful futures traders learn to read and understand their charts at a glance. In this continuing series, we’ll be covering charting basics that are important to futures traders. (more…)