Hello,
I understand there is a high correlation between the prices of some commodites and currencies such as Aus and Gold, Cad and oil ect.
What I want to know is how do you use this to make trades? Are there forecasts for commodity prices that can be used to help predict the currencies performance? Or do you wait for a situationn where the commodity price changes but the currency price does not then make the trade hoping for it to catch up? Do situations like this occur or do the currency and commodity move just move together?
Thanks
Kev
First of all you have to decide what kind of trader you are. Are you a position trader, swing trader or scalper; then perhaps you can consider commodities as part of your trading plan. There is not a perfect correlation between say the CAD and Oil. Usually if the overnight markets bump the price of oil, the CAD follows, but I have seen times when it is flat.
To put things into perspective as a retail trader, consider that you are probably the last trader to get information about what’s happening in the Oil market. There are many pro traders front running you and they know when to get in and when to take profits. About the time they are taking profits, you are probably getting in if you are a typical trader. My comments apply mostly to scalping and swing trading. If you are a position trader, you might be able to pick up some profits, but why not trade the commodity itself instead of the currency if you think you are a commodities expert?