Commodity Indicators That You Should Look Out For
The commodity market gives you many opportunities to trade and be profitable. Whether you are a day trader or a positional trader, you can trade in commodities using indicators, which help you spot high probability trading zones.Online commodity trading can be done on the MCX as well as on the NCDEX exchange. In order to be consistently profitable in the commodity market, you should know how to read the charts and look for the support and resistance levels on them.When you trade commodities, you can look for a few indicators to increase the probability of your trades.
Moving average is one of the most popular tools that are used to gauge the trend in the commodity market. Your broker gives you the commodity tips using the moving average. Moving average not only lets you take a trade with the trending market buy also lets you figure out any reversal in trend. This lets you book your profits early and thus maximises your gains.
Moving Average Convergence Divergence (MACD)
MACD is a popular indicator when trading the commodity market. Like the moving average, it also lets you analyse the trend of the commodity. When the MACD shows a positive value it reflects a bullish trend. But as the value starts to decrease it signals a possible trend reversal.
The Bollinger Band measures the overbought and the oversold condition in the commodity market. It has three lines, the upper line, which is the resistance, the lower line which is the support and the middle line which is the trend line. Price tends to move within the upper and the lower band. However in case the price moves further away from the bands, it tends to come towards the middle line.
Relative Strength Index (RSI)
RSI indicates the overbought and the oversold condition of the commodity market. It is read on a scale of 0 to 100. If the RSI reads a value of 70 or above 70 the market is overbought. Similarly, if the RSI value is less than 30 then the market is oversold. Most chartists use the 14-day RSI.RSI also lets you look at any divergence in the market. A divergence occurs when the price makes a higher high but the RSI makes a lower high. Similarly, there is a divergence when the price makes a lower low and the RSI makes a higher low.All of these commodity indicators can be used along with the support and resistance levels. These indicators are lagging indicators and the signals that they give cannot be the only criteria to trade in the commodity market.
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