CFD Trading Strategy for Commodities

Commodities are simpler to trade compared to stocks. A simple CFD trading strategy can be developed around the 200 bar moving average and some basic numbers.

A CFD Trading Strategy Does Not Have to Be Too Complicated

A CFD trading strategy can be as simple as commodities can allow. More specifically, commodities are often easier to analyse based on supply and demand information and overall market momentum.
Trading CFD contracts on commodities is just as risky as any other instrument or asset, at least for the most part. It is only when some risks are removed, that things become easier. Stocks remain risky and confusing for the most part of the trading year, because there are too many factors impacting stocks. Currencies are mixed, some are easier to predict than others, and then there are commodities where some insights can be obtained for the coming months, and traders can adjust their strategies accordingly. Online CFD trading becomes less risky and smoother when at least some big risk factors have been taken into account, or are not present at all for some time to come. In commodities one has to take into account the entire commodity index (CRB), and various factors impacting the single commodity in question. Commodities tend to trade out of phase for a while, so that the CRB index may rally for example, and some commodities get left behind for months. Eventually however every lagging commodity will end up rallying so as to catch up with the CRB index. So during that phase the downside risk in that lagging commodity will be significantly reduced.

CFD Trading Strategy Based on the 200 Bar Moving Average

A simple CFD trading strategy for commodities is the 200 bar moving average, or at least a good part of such a strategy. The idea is that if the market gets close to, or within proximity of this moving average on the daily or weekly chart, then it will likely test it. The idea can be tested through a strategy implemented on reliable CFD trading platforms, so that leverage is used, and convenient contingent orders are set in place. So when a test of the 200 bar moving average is suspected to occur, this doesn’t necessarily imply a change of the major trend, but maybe possibly a series of false buy and sell signals as price will approach and test that level. The test itself may result in a reversal at the moving average or a breach. Sometimes there are no fundamental factors involved, and such test moves are driven by speculators alone, who trade on a short to medium term basis. There is no magic, generic formula for commodities, as each commodity has its own unique factors. So that agricultural commodities for example are impacted by weather conditions for example, whereas precious metals by other, totally different conditions and factors. So it is possible to have all commodities rallying in general, and yet one may test the 200 bar moving average to the downside, while another commodity may test it to the upside, in all kinds of confusing ways.