Looking at The Markets: How to Read Commodity Charts
When looking at how to read commodity charts, there are three “views” for each commodity.We will take a look at each of the following commodity charts views:
Monthly. The longest-range view is the monthly chart, which shows the price movement over the last 10 to 30 years. Each vertical line, called a “bar” on this chart, represents one month’s price movement. The monthly chart is very important to get a long-term view over a period of many years.
Take a look at the monthly chart below. It shows the price of Silver over the last 20 years. The highest price paid was about $50.00 an ounce in 2011, and the lowest price was $5.60 an ounce in 1987.
Weekly. The next view is the weekly chart. It shows the same type information as the monthly chart, except it is for a shorter time frame and shows the price fluctuation week by week. Each “bar” represents one week’s prices, just like the monthly chart represents monthly prices, but on a weekly basis.
The weekly chart will also prove to be invaluable in planning your long-term trades. Later, I’ll show you how to use both of them.
Take a look at the weekly chart for Silver below. As you can see, the lowest price on the chart is $8.93, and the highest price is about $50.00.
Daily: Let’s look at the daily chart for March 2016.
Each commodity trades in a specific contract month (see Reference Section for a list). This particular chart is for March 2016 Silver. This means when you place an order for Silver, you would instruct the broker which contract month (delivery month) you wished to buy or sell a contract in. As an example, the following Silver contract for March 2016 Silver started trading back in 2014 and expired 18 months later.
Delivery months for each commodity are in the Reference Section.
Now, you might want to trade another contract month that is “further out,” a more distant month, like July 2016 Silver. The delivery month is the month that you are contracting to either deliver, or take delivery, of the commodity. (As a speculator, you will never take delivery, though.) We will discuss the pros and cons of doing this later in the course. For now, I just want you to understand the different “views” that you can see of a particular commodity.
There are a few terms that you will need to become familiar with. Most of these will be shown in the legend of the chart. Gecko Charts has this listed and is available at a click of a mouse.
While I’m thinking about it, every chart in this course was prepared using Gecko Charts 5.0 End of Day software. I’m in “love” with this software and could not imagine anyone trading without it. To know how to read commodity charts better, I highly recommend using the Gecko Charts software. (Click HERE for information on Gecko Software)
Learn more about David's Personal Coaching with Common Sense Commodities for leading edge information and training in commodities and options trading.
* Testimonials are not a guarantee of future success. All information is for educational use only and is not investment advice. Trading financial instruments, including Stocks, Futures, Forex or Options on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in any of these financial instruments you should carefully consider your investment objectives, level of experience, and risk appetite. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. The possibility exists that you could sustain losses exceeding your initial investment. You should be aware of all the risks associated with trading and seek advice from an independent financial adviser if you have any doubts. Past performance, whether actual or hypothetical, is not necessarily indicative of future results. All depictions of trades whether by video or image are for illustrative purposes only and not a recommendation to buy or sell any particular financial instrument and do not factor in trading costs in trading examples due to varying commission and fees among traders. The impact on market prices due to seasonal, market cycles or news events may already be reflected in the price. See full risk disclosure. See full risk disclosure.