Commodity Strategies: High-Profit Techniques for Investors and Traders

CHAPTER 6

Putting It All Together

PART ONE: OLD FRIENDS WITH A NEW TREND

By this point in our journey we hope that at a minimum we agree on two things: (1) that simply having a set of rational tools at your disposal is quite helpful in deciphering the commodities markets, and (2), that none of these tools need be hoes, pitchforks, or McCormick's famous reaper. Rather, while remaining attentive to a few key ingredients, which pertain to any commodity, we can begin to train ourselves to find consistent opportunity in the futures market. Certainly, there are times that seemingly present great opportunity, a bumper crop if you will, and others that reflect a market wedged between trends; however, a trend-following system can be the biggest contributor to success in commodities. When trading with the trend it is as if the wind is at your back, filling your sails. Mistakes can still be made, but often it would take a series of mistakes to cause major damage as long as you stay with the prevailing trend. However, the process of forming a long-term top or a long-term bottom can be the most painstaking, and profit-killing, part of trading. This is the period where trends are changing, and most investors are either reluctant, or oblivious, in admitting this possibility.

This takes us back to what is simply the nature of trends. Like any natural process, a trend consists of a series of stages. Like infancy and death, the birth and demise of market trends are typically the most difficult ...