Crude oil futures can be a very good forex trading instrument especially when they are rising. Often times new traders are attracted to futures as there is a lower risk with greater rewards, but this is quite far from the truth. Crude oil futures can swing quite frequently in a negative direction, and should usually be preceded by a correction in the market. This is because futures contracts do not have the predictive ability of a forward contract.
Until recently crude oil was in a large decline. It has recently spotted a significant support level near $70, which is the nerve center of the oil market. Many buyers were putting their money into oil near this level because they thought that $70 would be a good support level for the US economy. It has worked for many traders however is unlikely to last very long.
The next important level of support is $44, which is often marked by a horizontal line Stop Loss order. Many times prices will bounce off of this level, but typically they don’t stick there. Instead prices will fall to the lower low of $44, and that is usually the end of the buyers at that price.
Sometimes a candle will form above the $44 level, but more often than not the price will swing down to $30 or below. Then you have the dime chart, which can be really helpful if you know what you are looking at. The dime chart can make you identify if the price is oversold or overbought. This is a easy technical analysis skill to have.
Oil prices are often in a down trend, and usually are observed on the dime chart. Once you begin to see this kind of price movement it is very easy to identify the beginning of a new trend. Oil prices are often in a down trend, and you should start to sell when the price is past $50, or whatever it is that usually marks the beginning of a new uptrend.
The same can be said for gold and silver. Once prices reach those price levels, they usually sustain themselves there for a while. Once the price drops below them, this is an excellent area to buy into. This is because these price areas are usually sustained by natural supply and demand. If gold prices peak at $1,600 or below, this is typically an area that you can sell into because gold prices normally bottom at this level.
This is because gold tends to bottom at $1,600 or below. This presents an excellent opportunity to buy gold while the price is low. You can use this strategy to buy gold low and sell once the price is high.
Watch for moving averages to cross over as this can often be a signal that a trend change is about to take place. The moving average cross over is a signal that the trend is changing and the current move is likely to last for a while.
Normally each time the price crosses over the moving average line it is a signal that the change is going to be strong enough to cause a short term rise in the price of the commodity.
If you want to be able to predict when the price will cross over the moving average line, you can use the famous Stochastic Indicator. This is a forex trading indicator that was developed by George Lane in the 1970’s.
The stochastic indicator is great if you can find a way to predict when the price of a commodity is going to change. It is designed to show the degree of increase or decrease in the price of a commodity.
For example, if the indicator is moving above 80, this generally means that the price of the commodity is going to increase. If it is moving below 20, it means that the price is going to decrease.
By being able to predict when the prices of a commodity will change, you can present yourself with a great opportunity to make a lot of money. Stochastic Indicator is designed to help you predict this trend in order to allow you to make the proper entry into the market.
