Timing is Everything when Trading in Commodities
In futures and options trading, timing is everything. I constantly remind my clients and prospects that there is a big difference between being right in the direction of a commodity market and actually making money. I have witnessed traders be absolutely correct in their speculation of futures price movement, but miss getting into the trade due to unfilled limit orders, or entering the commodity position too early (which can cause the trader to run out of money or patience before the price move occurs).
Attempts at commodity price prediction can be based on technical oscillators, psychological barometers, supply and demand, or anything else that provides clues to price direction and timing. I am a firm believer that there aren't right or wrong trading tools but there are right and wrong ways to use them. Simply put, trading indicators can be compared to guns; guns don't kill people, people kill people. In trading, oscillators or charting tools don't siphon trading accounts; unfortunately traders sometimes do it to themselves by acting too aggressively to trading signals, or ignoring them altogether.
Further, while it isn't important which indicator you use to time a futures trade entry and exit, it is important how comfortable and confident you are in using it. This is especially true in reference to computer generated oscillators such as the MACD and Slow Stochastics. In the long run, I believe blindly taking all buy and sell signals triggered by such indicators would yield similar results. Accordingly, the primary factors playing a part in whether a trader experiences profits or losses are likely the ability to avoid panic liquidation, properly placing commodity risk management techniques in place, and exiting option trades that have gone bad before it is too late. In other words, I believe that good instincts and experience are more valuable than any technical indicator, or supply and demand graph, that you will run across.
Once you have determined your speculative tool of choice and determined your conclusion on the direction, or lack of, it is time to construct a strategy that will benefit if your assessments are accurate and mitigate risk if you are wrong. This may include the use of options, futures or a combination of both. The method that you choose should be based on your risk tolerance, personality and risk capital.