Tips for a beginning commodities trader?
I am new to commodity investing and would like to dip my toes into it.
I've been investing for a few years, and am fascinated with macroeconomics, and understanding how the world works in general, and how all the moving parts are intertwined.
I've read books such as "Reminiscences of a Stock operator" and thought Lefevre's 30,000 foot approach to predicting certain commodities will rise based on world events was really interesting.
So I wanted to ask, as a humble beginner:
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What does your weekly / monthly commodity investing routine look like?
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Are there certain news sources or aggregators that are good to glance over, that help filter out the "noise", and make it easier to make informed decisions?
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For a US-based investor, are ETF's on the NYSE the best way to invest in commodities such as Copper, Coffee, Wheat, etc? How do you find the best investment vehicle for each commodity?
Many thanks in advance for any advice / tips.
1. Look at all the data/model as well as price updates, re-examine risk-reward of current prices given what the price already is and where models say they could go. For example, if you are in gas- you would get all the weather forecast updates, see what that says about demand, see what that says about supply and demand trajectories, what those trajectories say about prices, and compare that to where prices are.
2. Lots of informative news sources (Bloomberg, Reuters, Twitter, etc) but they are really more explanatory than predictive. By the time you read about something- it is either a sudden development that the market reacted to already or a structural development whose effects have become so noticeable that journalists are noticing it- and usually when that is the case that trend has peaked and is no longer tradeable.
3. As a retail investor, ETFs (eg US Oil, UNG) are the easiest way to get exposure to commodity prices without worrying about things like expiry, exchange for physicals, etc. Just look up the highest AUM and most liquid ones for each commodity. But professional commodities traders don't really trade ETFs: ETFs are just baskets of commodities futures that traders can just execute directly and professional traders usually have much more complicated strategies than going long or short the outright price so ETFs are not really appropriate for them.
thank you oil_quant!
I'll check out those resources.
As a follow up question, do you have any tips on the best way to hold commodity positions open for longer term (months, years)?
From my understanding, trading futures is more for holding positions for a few weeks, unless I roll over my futures contracts, not sure if that's a difficult/costly process or not.
Thanks again for your suggestions and help, much appreciated.
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