Binary Options Best Trading Strategies for Commodities
Binary Options Best Trading Strategies for CommoditiesAugust 22, 2012
Before we even start talking about trading and investing in commodities, let’s start with understanding exactly what commodities are.
The classic definition of commodities is: Goods used for commercial ends that is interchangeable with other various but similar commodities. Commodities are usually used as types of resources in the manufacturing of other services, products, or goods. Distinguishing attributes as well as performance changes from one commodity to another. However, it is generally the same across all producers. When traded at exchanges such as Nadex or CBOE, commodities must also meet a predefined set of criteria also referred to as a basis grade.
Now, how does this play into binary options trading? You don’t have to be a financial adviser or an investment portfolio manager for Merrill Lynch in order to understand basic market supply and demand rules. To demonstrate I would like to take a few real-life trading tips and show you how its done:
Trading Scenario #1: The Effect of the Recent Drought on Beef Prices
It’s no secret that the farmers in the Midwest have experienced one of the worst droughts ever, and that specifically corn production has been hit the hardest. Obviously a recommendation for a long hold on agricultural commodities such corn would be an obvious conclusion. However, corn is used to feed cattle, and since the prices of corn bushels have increased dramatically many farmers have plainly stated that they plan to slaughter their live stock.
OK, but what does this mean?
It means that in the short term COW, LH and HOGS futures and ETF’s are bound to take a dip because of a lot of meat that will flood the market. However, in the long term the prices will increase as demand will rise. So, if your sitting in front of your computer analyzing financial news and data and decide you want to start trading commodities and make money through a recommended binary options broker, your best move would be to open an account with a Cysec licensed broker such as Optionbit.
Secondly, you would need to check out the optionbit asset index. Since this broker is only offering Copper, Crude, Gold and Silver futures on Comex, I would either research these commodities or alternatively look for a broker that would allow me to trade on the commodities I am interested in.
But let’s say that for all intents and purposes that COW is available for trading. I would immediately analyze the charts and look for a patterns. It’s plain to see that April and the start of May were horrible for this commodity, and then the prices stabilized around $28.5 a share with a downside trend on the moving average line.
In this scenario I would take a step back and prefer to wait until I see clear patterns, since the grouping of the candles is very tight it is a bit difficult to get a clear picture of the direction its going.
Trading Scenario #2: Trading Corn on Traderush
How does it Work?
Lets say you think corn prices will go up due to the drought. Your next step will be to open an account, deposit using your credit card or ewallet and receive your bonus.
Secondly, select the binary options choice on the trading panel. On the sub-menu choose commodities and then corn (see image below). If you think prices will go up select call or above after you enter the amount of money you want to risk and the expiration time. I don’t recommend 60 second trading in any case if you have not done so before.
To sum up, before trading commodities please take a minute and read our broker reviews. They contain in-depth analysis and recommendations based on personal trading experience. As in every case I always recommend opening a demo account and trying out the software on practice mode before actually risking your money.