Commodity Trading

Category Archives: Commodity Trading

Investment is a game of money of securing future money by taking a risk today. Trading therefore comes with a list of rules to play by. Commodity trading in particular offers tremendous potential for becoming a completely different asset class.

However, before investing in any kind of commodity, you must do an in depth research and also ask your broker as many questions as possible. Through this category archive we provide you as much information and valuable insights into the world of commodity trading.

We at Cannon Trading are here to help you with your commodity trading needs. You as a trader should select your commodity trading advisor only after performing a due diligence on him/her. We in fact do that for you. This way, you get only the best advice to help you with your commodity trading.

We’ve got the information that you might need at every step of commodity trading, and you’ll find it all right here in the commodity trading section of our blog. Read up, and read on to get equipped!


How to Invest in Commodities With a Futures Contract

March 18th, 2019 Filed under Commodity Trading, Futures Trading | Comment (0)

Futures Contract

If you are new to investing, you probably started with or have experience in stocks. Stocks are an excellent way to gain experience in investing, and grow your investment portfolio. With your newly gained experience, you may be ready to take on some more sophisticated asset classes, such as commodities which can often be more complicated and more risky, but yield a much higher return. At Cannon Trading, we will walk you through everything you need to know about how to invest in commodities effectively for the highest overall return, and pair you with your own professional broker to achieve your trading goals.

If we are going to learn how to invest in commodities, first, let’s begin by defining what a commodity is. A commodity is defined as a select group of basic goods in demand all across the globe. This includes harvested goods such as wheat, corn and flour, as well as energy sources and metals such as oil, gas, gold and aluminum. Since it is such a vast category, commodities are divided into two groups: hard and soft. Hard commodities such as metals and gas require mining or drilling while soft commodities are things that are grown and require harvesting. These commodities are global, and as such, is a good idea to invest in them. Since these are global assets, people often don’t care, or don’t think about where they come from, or if there is any brand name attached to it making it wise to invest in commodities.

Beginning in the 1800’s, finding a trader willing to take a position in a forward contract was an easy task, but much more difficult to find a trader at the time of contract settlement. As a result, the Chicago Board of Trade created futures contracts. The objective of futures contracts is to minimize the risk of fluctuating prices by putting up and maintaining fixed original margins. When investing in commodities, this fixed pricing is vital. Commodities trading began shortly after with the trading of agricultural goods. As the market place expanded, it began to involve financial contracts such as government backed securities, foreign currency, metals, energies, and more. With these resources being naturally occurring, investing in commodities may seem like a safe option. However, it is this trait that makes them prone to supply and demand, and the risk control became necessary for farmers.  

This is where learning how to invest in commodities becomes risky. Commodities are naturally occuring, making investing in them an often volatile practice due to the nature of supply and demand. Depending on the individual product’s relationship with supply and demand will make investing in some commodities more risky than others. For example, a bountiful harvest of wheat crops in a season will increase our supply of wheat causing its price to fall. However, in the event of a naturally occurring threat such as a drought or flood, prices of wheat may go up for lack of future supplies. How can you choose which commodity to invest in? It is important to note that some commodities are more volatile than others. At certain times, hard commodities like gold can be less volatile than soft commodities like wheat or corn, and other times the opposite is true. When learning how to invest in commodities, it helps to imagine which commodity will be more consistent, and which will involve a higher risk/reward ratio when basing your decision.

When learning how to invest in commodities, it is important to know your options. Given commodities are mostly physical goods, there are several options you can take. The first is investing this your commodity directly by buying the actual physical product. You can also buy shares of stock in companies producing your commodity or exchange-traded funds specializing in your commodity. If you are looking for an alternative, you may want to look into a futures contract. A commodities futures contract specifically is an agreement between a buyer or end user and a seller to make or take delivery of a commodity at an agreed upon price at a designated date. A futures contract will help to mitigate unforeseen fluctuation in the value of commodities and ensure that the transaction is honored by all those involved.  

Any successful financial portfolio requires diversification. Your financial portfolio should be filled with diverse asset classes and commodities that will react differently to the financial world around them. Investing solely in soft commodities in one area may lead to financial hardship in the event of a low supply yield. Investing in solely hard commodities such as gold and crude oil can be cumbersome and hinder your diversification. Cannon Trading offers more information and helpful resources on how to invest in commodities. You and your broker will work together to achieve your trading goals and grow your portfolio. You will also have access to tools and valuable market information to help you begin diversifying your portfolio with valuable commodities. In an impersonal world, having a good relationship with a high quality broker can make all the difference.

Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources.  


Asset Classes for Futures and Commodities Trading

March 4th, 2019 Filed under Commodity Trading, Futures Trading | Comment (0)

commodities trading

When we talk about the available  commodities tradings markets, we tend to group them into categories or sectors or asset classes based on their likeness and similarity.

Below we’ll highlight the main asset classes, include some of the more well-known commodity trading futures contracts as examples as well as some other information useful for traders.

Currencies:  With all the different types of currency being exchanged in this world as a means of making transactions, some are so widely used – and trusted – there are also available specific currency futures contracts as a means of trading large blocs of that particular currency.  Some of the more prominent futures contracts are the Euro (equal to trading €12,500), the Japanese Yen (equal to trading ¥12,500,000) and the British Pound (equal to trading £62,500). Other important currency futures contracts include the Swiss Franc, Australian & Canadian dollars and Mexican Peso.  These markets are traded on the Chicago Mercantile Exchange 23 hours a day, from 5:00 P.M. around the clock to 4:00 P.M, Central Time.

Energies: While there are hundreds and hundreds of energy futures contracts listed on the NYMEX exchange – sub-categorized under asset classes like coal, electricity, ethanol, crude oil, natural gas and refined products – hands down the all-time trading leaders in terms of daily volume number just five: West Texas Crude Oil, Brent Crude Oil, Reformulated Unleaded Gas, Henry Hub Natural Gas and Ultra-Low Sulphur Diesel, more commonly known as Heating Oil.  Like all futures contracts, energy futures are leveraged products. For example, one Crude Oil futures contract controls 1,000 barrels of the product. Energy products influence every facet of our lives. Not surprisingly, they are some of the most widely traded futures contracts in the world.

Financials: Financial Futures are associated with those futures contracts whose underlying assets are interest-bearing instruments.  Those traded on U.S. exchanges include futures contracts whose underlying assets have longer-term maturities, like the 30-yr. Treasury Bond and the 10-yr. Treasury Note (traded on the Chicago Board of Trade).  Futures contracts whose underlying assets have short-term maturities include the Eurodollar (90 days), traded on the Chicago Mercantile Exchange. Its underlying asset is a 90-day deposit of 1 million U.S. dollars in banks outside the United States – in Europe, Tokyo or Beijing.  The Eurodollar is largest futures contract in the world. Prior to the electronic trading, the Eurodollar trading pit at “the Merc” was the largest trading pit ever, nearly the size of a football field.

Metals:  Futures contracts whose underlying assets are certain metals include Gold, Silver, Copper, Platinum and Palladium, all traded on the COMEX Exchange.   As was the case as far back as 4,000 B.C. – the age of the oldest-known adorned artifacts – gold still takes the top prize in terms of futures market trading interest.  These days, apart from its intrinsic value, gold’s attractiveness is also derived from its standing as a “safe haven” asset, as well as an inflation hedge. Given the nick name “Dr. Copper,” for its honorary degree in economics, the Copper futures contract’s underlying asset is 250,000 pounds of the metal first used by humans.  It’s so widely used – being a good conductor of electricity, attractive for a wide range industrial applications and relatively inexpensive compared to other metals – its futures contract’s price is seen as a global economic indicator.

Grains:  Of all the futures contracts traded on U.S. exchanges whose underlying assets are tangible commodities, as opposed to those that are “cash settled” (more on those later), grain futures are the hallmark asset class.  It was this commodities trading that spurred the creation of a central marketplace; farmers and buyers could sell and buy corn under established procedures for weighing and grading their crops. As farmers and buyers began making early-year commitments to conduct transactions later in the crop year, the futures contracts as we know them evolved.  Agreed-upon contracts could now change hands before the agreed-upon date with and between other participants- essentially during the entire crop year. Today, wheat, corn, oats, soybeans and its main by-products soybean oil and soybean meal are enormous markets. And with the vicissitudes of weather (temperature, precipitation) and its effects on crop quality being a major factor in determining prices, grain futures can be some of the most volatile markets traded today.

Meats: Alas, when we talk about livestock futures, the one contract widely considered the iconic commodity in popular culture – Pork Bellies – is now a distant memory.  Delisted in 2011, in its hey days in the late ‘70’s and early 80’s the “bellies” pit was the center of excitement on the Chicago Mercantile Exchange. Today, Lean Hogs is the futures contract for the pork trader.  For beef interests, Live Cattle and Feeder Cattle trade.

Indices:  Some of the more heavily traded futures contracts among speculative traders are stock index futures contracts and not surprisingly.  Among all subjects financial in nature we think of in the world, stock indexes like the Dow Jones Industrial Average, the S&P 500 and Nasdaq Composite – and the stocks that make them – are the most often discussed, analyzed and reported on.   Oddly, stock index futures were a rather late arrival, with the S&P 500 and Nasdaq futures contracts first introduced in 1982. It wasn’t until 1997, in the interest of increasing accessibility through a reduced multiplier, that the E-mini line of futures was introduced.  All indexes’ prices are a multiplier of the value of the prices of all the stocks within their individual indexes. And unlike other futures contracts, stock index futures contracts do not involve physical delivery; you can’t actually conduct a transaction of little slices of the 500 stocks in the S&P 500, for example.  Instead, the contracts are cash settled, so the buyer and seller receive the cash difference (credited or debited depending on the outcome of the trade) on the last day of the contract’s life. Today, stock index futures are traded all over the world. Their underlying assets are some of the most well-known entities in finance: Hong Kong’s Hang Seng, Japan’s Nikkei, the United Kingdom’s “Footsie” (FTSE),  Germany’s DAX, France’s CAC 40.

Softs:  Cocoa, coffee, cotton, orange juice (who doesn’t remember the famous scene in Trading Places), and sugar.  These futures contracts’ underlying assets make up some of the oldest futures contracts traded. They represent staple products we all consume and they’re worthy opportunities for allocating risk.  Some of the longest-remembered bull and bear markets – and some of the most volatile – in all commodities trading have involved these markets. Weather’s beneficial and adverse effects on these commodities’ crops have made for some historical moves.

Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.


Futures eBook & Trading Levels for 8.17.2018

August 16th, 2018 Filed under Commodity Brokers, Commodity Trading, Crude Oil, Day Trading | Comment (0)

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Cannon Trading’s eBook! Written by our very own staff of brokers, this eBook is designed as a guide to the commodities market for both beginners and veterans alike. Inside you can find:
  • A plan with steps for success
  • The top mistakes traders make daily
  • How to handle the market noise
  • And much more!
The futures industry is complex and risky, which is why you need someone to be forthright with you….

Futures Forthright eBook – FREE INSTANT DOWNLOAD

Good Trading!
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

Futures Trading Levels

08.17.2018

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Futures Trading Levels For Aug. 17th
Contract September 2018  SP500 #ES_F Nasdaq100  #NQ_F Dow Jones  #YM_F Mini Russell #RTY_F BitCoin Index #XBT_F
Resistance 3 2892.08 7499.50 26206 1719.00 6778.73
Resistance 2 2871.92 7467.00 25907 1706.00 6628.49
Resistance 1 2857.83 7428.25 25745 1697.00 6515.45
Pivot 2837.67 7395.75 25446 1684.00 6365.21
Support 1 2823.58 7357.00 25284 1675.00 6252.17
Support 2 2803.42 7324.50 24985 1662.00 6101.93
Support 3 2789.33 7285.75 24823 1653.00 5988.89
Contract December Gold #GC_F Sept. Silver #SI-F Sept. Crude Oil #CL-F Sept.  Bonds  #ZB_F Sept.  Euro #6E_F
Resistance 3 1212.6 15.38 66.93 145 12/32 1.1507
Resistance 2 1200.8 15.10 66.22 145  1/32 1.1470
Resistance 1 1190.7 14.87 65.84 144 26/32 1.1434
Pivot 1178.9 14.59 65.13 144 15/32 1.1397
Support 1 1168.8 14.36 64.75 144  8/32 1.1360
Support 2 1157.0 14.08 64.04 143 29/32 1.1323
Support 3 1146.9 13.85 63.66 143 22/32 1.1287
Contract Dec.  Corn #ZC_F Sept. Wheat #ZW_F Nov. Beans #ZS_F Dec. SoyMeal #ZM_F Sept. Nat Gas #NG_F
Resistance 3 384.5 576.8 916.17 346.43 3.00
Resistance 2 383.3 572.2 907.83 342.27 2.97
Resistance 1 381.5 567.1 902.42 339.63 2.94
Pivot 380.3 562.4 894.08 335.47 2.92
Support 1 378.5 557.3 888.7 332.8 2.9
Support 2 377.3 552.7 880.33 328.67 2.86
Support 3 375.5 547.6 874.92 326.03 2.83

Economic Reports,  source:


Economic Reports, source

https://app.bettertrader.com

 

 

This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.


Gold weekly chart +Support & Resistance Levels 6.21.2018

June 20th, 2018 Filed under Commodity Brokers, Commodity Trading, Day Trading, Future Trading Platform, Futures Broker, Gold Futures, Metal Futures | Comment (0)

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Dear Traders,

Follow us on Twitter and receive real time trade updates, market developments and breaking news!!
Gold WEEKLY chart for your review below.
This Sunday night I got the first weekly sell signal since the end of 2017. You can see the little red arrow along with the current bar marked in red. Just because a signal happened, does not mean we will see a sell off but for me personally it is a good probability that the pressure is stronger to the downside. I like some of the option plays one can do using vertical put spreads.
The chart above includes some proprietary studies/ALGOS.
These ALGOS along with a 15 minutes one on one session is available for a free trial.

To sign up and more info visit: https://www.cannontrading.com/tools/intraday-futures-trading-signals 

Good Trading

Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

Futures Trading Levels

06-21-2018

Contract September 2018  SP500 #ES_F Nasdaq100  #NQ_F Dow Jones  #YM_F Mini Russell #RTY_F BitCoin Index #XBT_F
Resistance 3 2801.25 7461.33 25029 1737.83 7109.66
Resistance 2 2789.75 7398.92 24944 1725.87 6961.28
Resistance 1 2780.25 7351.58 24803 1718.83 6857.81
Pivot 2768.75 7289.17 24718 1706.87 6709.43
Support 1 2759.25 7241.83 24577 1699.83 6605.96
Support 2 2747.75 7179.42 24492 1687.87 6457.58
Support 3 2738.25 7132.08 24351 1680.83 6354.11
Contract August Gold #GC_F July Silver #SI-F Aug. Crude Oil #CL-F Sept.  Bonds  #ZB_F Sept.  Euro #6E_F
Resistance 3 1284.9 16.48 67.89 144 27/32 1.1749
Resistance 2 1281.7 16.43 67.12 144 19/32 1.1713
Resistance 1 1276.7 16.36 66.33 143 31/32 1.1685
Pivot 1273.5 16.31 65.56 143 23/32 1.1649
Support 1 1268.5 16.24 64.77 143  3/32 1.1622
Support 2 1265.3 16.19 64.00 142 27/32 1.1586
Support 3 1260.3 16.12 63.21 142  7/32 1.1558
Contract July  Corn #ZC_F July Wheat #ZW_F July Beans #ZS_F July SoyMeal #ZM_F July Nat Gas #NG_F
Resistance 3 367.0 509.2 917.00 348.10 3.04
Resistance 2 361.8 499.6 906.50 343.00 3.01
Resistance 1 358.0 493.9 898.00 338.10 2.98
Pivot 352.8 484.3 887.50 333.00 2.95
Support 1 349.0 478.7 879.0 328.1 2.9
Support 2 343.8 469.1 868.50 323.00 2.89
Support 3 340.0 463.4 860.00 318.10 2.87

Economic Reports, source: 

http://app.bettertrader.co 

 

This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.


Trading Crude Oil Futures

June 13th, 2018 Filed under Commodity Brokers, Commodity Trading, Crude Oil, Day Trading, Energy Futures, Futures Broker, Futures Trading, futures trading education, Options Trading, Trading Guide | Comment (0)

Tips for day trading NYMEX crude oil futures

By Ilan Levy-Mayer, VP Cannon Trading Co, Inc.

When it comes to day trading futures contracts, crude oil futures are assumed one of the leading positions as far as trading volume.

 

During the month of May 2018,  crude oil futures averaged around 1 Million contracts traded per day! That actually surpasses contracts like the ten-year notes, mini SP, mini Nasdaq and others who have traditionally been leaders’ in terms of volume.

 

Part of the growth in crude oil futures is attributed to day trader participation. Day traders, by definition, will enter and exit their positions during the same trading day. This adds volume to the market traded.

 

Some of the tips I am sharing below can be applied to most futures contracts as well as other financial products that are traded like stocks, forex, bonds and others. Some of the advice I am sharing is very specific to the crude oil futures trading field.

 

  1. Know the product you are trading:

 

  1. Just like a trader who trades a stock like Facebook knows what Facebook does, when its earning reports are due and other factors, so does a crude oil futures day trader needs to know a few facts about crude oil:

 

  • Contract Size: Crude Oil Futures consist of 1,000 barrels. For the trader this means that each full $1 move in crude futures = $1,000 against you or in your favor.

 

For example:  A move from 72.10 to 73.10 = $1,000 and a move from 72.10 to 72.11 = $10 (the minimum fluctuation size or the tick size). Be aware that the CME also offers the mini crude contract,  which is half the size.

 

  • Trading Hours: Crude oil futures trade on the Globex terminal between the hours of 5:00 PM CST the DAY BEFORE to 4:00 PM CST the following day. Which means 23 hours of straight trading. It is important to know that most of the volume will trade between the hours of 8:00 AM CST and 1:30 PM CST, as these hours correspond to the “pit session” of the old trading floor.

 

Another key aspect to remember is that crude oil is a deliverable commodity and the “front month” will change every 30 days or so. For example: since May 22nd 2018 we have been trading July crude oil.

 

  • Reports: There are more than a few reports that will affect crude oil future prices indirectly. These include monthly unemployment, the FOMC rate decision, and a few others.

 

However, there are two major reports that move crude oil futures and its by-products (unleaded gasoline and heating oil) sharply: The API report, which comes out at 3:30 PM CST every Tuesday, and the DOE (Dept. of Energy) inventory numbers, which come out almost every Wednesday at 9:30AM CST.

 

Take a look at this one-minute chart from Wednesday, May 16th right around the report time below to understand the volatility involved.

As you can see above, the market made a move of $700 per ONE contract in a matter of minutes, perhaps even seconds! That type of risk and opportunity is one of the factors attracting day-traders into the crude oil market.

 

  • Geo Political Events: Middle East tensions, the Iran nuclear deal, tensions between Iraq and its neighbors…these are all examples of events that affect crude oil prices. Not to mention OPEC meetings!

 

 

  1. Trading Personality:

 

In my opinion crude oil (like many other markets) will have one of the following 3 modes: trending, two-sided volatility, or Choppy/quiet/range bound trading.

 

My experience is that crude will more often fall into the first 2 categories:  strong trend or two-sided volatility.  This leads me to my next point below, different trading set-ups.

 

  1. Trading Set-Ups:

 

My preferred methods for trading crude are either breakout concept in an attempt to catch a strong move up or down once the market broke some key support or resistance levels, AND/OR counter trend methods to take advantage of when the market is oversold or overbought. Crude does seem to bring more fear and greed out of traders. So looking at RSI levels, for example, and using moving averages ON the RSI to try and get a feel for market reversals are methods worth exploring.

 

  1. Keep a journal:

 

Like with any other trading, keep a journal. Take notes on how the market reacted to certain reports, how the markets traded during certain times of the day, and action you took and emotions you had that either helped or hurt you while trading. These notes will help you going forward.

 

In summary, crude oil futures volume has increased significantly these past few years. The crude oil futures offer traders certain dynamics that other markets may not at certain times. Volatility, fear and greed are key traits for this market. Remember that trading crude oil futures specifically and futures and options in general carries a large degree of risk and is not suitable for all investors. Make sure you consult with a series 3 broker if you never traded this market before. As always, I wish you Good Trading!

 

Important: Trading commodity futures and options involves a substantial risk of loss.

The recommendations contained in this letter are of opinion only and do not guarantee any profits.

There is not an actual account trading these recommendations.

Past performances are not necessarily indicative of future results.

Download Cannon’s new eBook, “Futures Forthright” instantly.


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