TRADETHINK ARTICLES

Trend Following for Commodities Traders

September 23, 2009

By Chris Morse

Trend following has long been a preferred method of trading favored by seasoned commodities traders. Many traders are fully aware that longer-term trends take place in the commodities markets. The question that most traders need to ask themselves is how to take advantage of the longer-term trends.

Trend trading is far different from day trading in many respects. First of all a trend trade (position trading) can last days, weeks or months. On the other hand, a day trade may last seconds, minutes or hours. Trend followers are looking for big moves of $5,000, $10,000 or even $50,000 on a single trade. A day trader is looking to capture only a couple of ticks or the swing trade for the day. Trend followers may only take a trade or two in a month for a particular market. Day traders can make many trades throughout the trading day every day.

To be a successful trend follower one must possess several traits. When you are in a big move you need to let the trade run. Cut your losses if you are in a trade that is going against you. Don't be afraid to take multiple losing trades in a row. It is extremely important to not second guess or cherry pick trades.

With trend following it is essential to follow a robust trading strategy. One trend trading strategy favored by many traders I work with is Trade Think. Below you can see several trends that are happening right now across the commodities markets.

Long Trades

Euro Currency

Currently Trade Think MT (medium-term) is shown to be long the Euro Currency futures contract. Our system signaled to go long (buy) the Euro on 5/20/2009 at 1.3704. Please see the chart below:

As you can see Trade Think MT went long (bought) the Euro and is currently long with an open profit of $12,162.50 per contract.

Gold

Currently Trade Think MT (medium-term) is shown to be long the Gold futures contract. Think MT signaled to go long (buy) Gold on 9/2/2009 at 974.30. Please see the chart below:

As you can see Trade Think MT went long (bought) Gold and is currently long with an open profit of $3,060 per contract. Go here to receive complimentary trade signals for gold.

Silver

Currently Trade Think MT is shown to be long the Silver futures contract. Our system signaled to go long (buy) Silver on 9/2/2009 at 1522. Please see the chart below:

As you can see Trade Think MT went long (bought) Silver and is currently long with an open profit of $8,300 per contract.

Five-Year Notes

Currently Trade Think MT is shown to be long the Five-Year Notes futures contract. Our system signaled to go long (buy) the Five Year on 8/19/2009 at 115. Please see the chart below:

As you can see Trade Think MT went long (bought) Five-Year Notes and is currently long with an open profit of $130 per contract.

Short Trades

Dollar Index

Currently Trade Think MT is shown to be short the Dollar Index futures contract. Our system signaled to go short (sell) the Dollar Index on 7/15/2009 at 79.82. Please see the chart below:

As you can see Trade Think MT went short (sold) the Dollar Index and is currently short with an open profit of $2,820 per contract. Go here to receive complimentary trade signals for markets like the Dollar Index.

Feeder Cattle

Currently Trade Think MT is shown to be short the Feeder Cattle futures contract. Our system signaled to go short (sell) Feeder Cattle on 7/15/2009 at 97.05. Please see the chart below:

As you can see Trade Think MT went short (sold) the Feeder Cattle and is currently short with an open profit of $175 per contract.

From the diversified selection of markets above you can clearly see that there are some great trading opportunities when using a longer-term trend following approach. Trend following works across all major commodities market sectors. If there is a trend a good trading strategy will catch it. The rest is up to you.

About the Author

Chris Morse is the Developer of the TradeThink trading system. He has been involved in the development of trading strategies for nearly ten years. Mr. Morse developed a very robust system which is now in private use at one of the largest FCM's and has earned sizable returns for the last 3 years. Mr. Morse now focuses his time exclusively on developing and managing his systems.

Futures trading is not suitable for everyone and past performance is not necessarily indicative of future results