More than time, commodity value movements follow a comparable pattern. Let us say wheat has been trending down in value for about 8 months. Then it stops trending down, and the value stays in a sideways trading range of $4.00 to $4.30 per bushel, for 2 months. This 2 month sideways trading range is a base of accumulation. This tends to be a alot more quiet period exactly where costs are bottoming out.
The subsequent phase is when the value moves up, and out of the accumulation trading range. In our wheat example, it would mean the value closed solidly over $4.30. This is known as a breakout. The value broke out of the 2 month trading range, and is now poised to continue higher. There will be intermittent value reactions downward in the course of the main upward value movement, but general costs will move up.
Right after a important upward value movement, in most cases a great many months or longer, there is a topping out period. This is also known as a distribution period. It tends to be a volatile period, with costs in some cases wildly swinging up and down. Eventually costs start out to fall with intermittent rallies till we get to a new sideways trading range once again, also recognized as a base of accumulation. Then the whole procedure starts all over once again.
This is the pattern of a usual recurring procedure that commodity value movements go through. Very first, you have accumulation, and then costs go up. Then you have distribution, and costs go down. Overall, costs tend to go down quicker than up. It is crucial to become proficient at chart reading, also recognized as technical analysis. This gives you a massive advantage whether you are trading the commodities market place or the stock market place.
The important to successful trading is to generally have as a great many aspects as probable in your favor, before taking a position in the market place. If you do that, and implement sound dollars management, you are now trading like a genuine pro.
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