Commodity trading is an attractive option for investors and traders too. You might be interested in oil or natural gas trading. Being a fossil fuel with several applications, natural gas is a commodity worth checking out. So, what are some tips to do intraday trading in natural gas futures?
I have asked myself this question and it is possible you have wondered about the same issue.
This is true if you are keen to learn how commodity trading works, and how you can apply day trading to natural gas futures.
When it comes to natural gas trading, you will use strategies that you would use in trading other commodities like oil or gold.
However, you should aware of the factors that affect natural gas trading such as supply, demand and also weather.
In this article, I will highlight the tips you can use to do intraday trading in natural gas futures.
What is intraday trading in natural gas futures?
Intraday trading in natural gas futures is the buying and selling or trading of natural gas future contracts within the same day.
From this definition, intraday trading of natural gas futures means that all the positions you take are squared-off before the market closes at the end of that day.
Intraday day is also referred to as day trading, and the ownership of the underlying natural gas assets do not change ownership as a result of the trades.
Tips for Intraday Trading in Natural Gas Futures
These are the top tips, ideas and strategies you can use for intraday trading in natural gas futures;
- Understand the market.
- Know the factors that affect natural gas prices
- Keep an eye on the major natural gas producers.
- Use analysis when day trading natural gas
- Book your profits when you reach your target.
- Determine your entry and target exit prices.
- Learn basic rules of intraday trading.
- Choose your broker or trading platform.
- Avoid moving against the market.
In the section below, I am going to explain the tips and the ideas.
9 Top Tips for Intraday Trading for Natural Gas Futures
Here are the top nine tips for your day trading activities for natural gas futures contracts.
Understand the market.
You should take time to study and understand the natural gas market. This is going to help you have the key information about natural gas futures.
Know the factors that affect natural gas prices.
As you start trading natural gas futures, you will need to be aware of the natural gas prices.
As a commodity, natural gas prices are affected by various factors. It is important if you can get to know these factors.
Keep an eye on the major natural gas producers.
Production of natural gas is something you should be aware. This is simply because the supply side of natural gas affects the prices and the market.
This means that you should keep an eye on the natural gas producer. Understanding the moves they are making or what is going on in their domestic economies will give you an indication of what to expect.
Use analysis when day trading natural gas.
Once you have made the decision to plunge in, you need to undertake both fundamental and technical analysis.
Understanding the trends and charts in natural gas market will guide you in making informed decisions.
Book your profits when you reach your target.
It is said that when investing or life in general, the key decision is when to stop once you achieve your goal or success.
The main objective of trading in natural gas futures is to make a profit. You should define this and once you have achieved it, book your profits.
You should have a goal of how much you would want to earn. Read this article that I wrote on how much you can make from your commodity trading activities.
Determine your entry and target exit prices.
This must be the most important trading decision you are making right now.
Based on the research you have undertaken and the information you have gathered, you should determine your entry and exit prices.
Learn basic rules of intraday trading.
In any market, you should understand the rule of the game. It is the same with intraday trading.
You should take time to learn and understand the basic rules of how day trading of natural gas works.
This includes understanding the rules set by your trading broker or the trading platform you are using.
Choose your broker or trading platform.
Trading in natural gas futures might require an intermediary. This is where a broker comes in.
You should choose the trading broker or platform you will use wisely. This includes taking steps to open an account and funding the trading account.
Avoid moving against the market.
This is an important tip when it comes to day trading natural gas futures.
You should understand the market and avoid going against it. This is to minimize your risks of making losses.
What is the best strategy for Intraday Trading?
It is important to let you know that intraday trading is one of the riskier ways to trade in natural gas futures.
If you are a beginner in natural gas trading, you should realize the basic and best strategy is one that helps you avoid losses while providing you with profits in a short period of time.
5 Best Intraday Trading Strategies
The best and top five strategies for intraday or day trading include;
- Momentum Trading Strategies.
- Reversal Trading Strategy.
- Breakout Trading Strategy.
- Gap and Go Trading Strategy.
- Moving Average Crossover Strategy.
Using the right strategy will help you make a profit and avoid losses. You should ensure you do your due diligence before making an investment.
Can we do intraday trading in futures?
The simple answer is yes. You can do intraday trading in futures.
This means that you would buy and sell a futures contract within the same day without holding open long or short positions overnight.
By now you are aware that you can buy or sell futures contracts as one of the ways to trade in natural gas. Futures can help you to hedge against risks to investment in a portfolio of stocks.
Day trades vary in duration. They can last for a couple of minutes or for most of a trading session.
It takes lots of knowledge, experience, and discipline to day trade futures successfully.
Which Indicator is the Best for Natural Gas Trading?
When you undertake to natural gas trading, your objective is to make money and turn a profit from your commodity trading activities.
To do this successfully, you need to understand the market and do research. This is where both fundamental and technical analysis comes in.
The top three indicators for natural gas trading include;
- Moving Average.
- Moving Average Convergence Divergence
Technical analysis, which helps forecast the direction of commodity prices through the study of historical price data, differs from fundamental analysis, which examines the influence of related economic and financial factors such as weather and gas inventories on prices.
If fundamental analysis helps form traders’ initial expectations about possible price movements within certain periods, technical analysis helps them identify the right timing for their decisions.
How to Trade Natural Gas Futures
As you have realized by now, natural gas is one of the highly traded commodities in the world today.
This provides you with huge opportunities as a day trader in natural gas.
If you are a trader, the most common way you will trade or take a position on natural gas is with a futures contract.
One such contract is the Henry Hub natural gas futures contract on the Chicago Mercantile Exchange (CME).
The name comes from the Henry Hub, a natural gas pipeline in Louisiana which serves as the official delivery location for futures contracts.
By volume, natural gas futures are the third largest physical commodity futures contract in the world.
The idea for a natural gas futures contract is simple. You agree to the delivery of a certain amount of natural gas at a set date in the future, and for a pre-agreed upon price.
In conclusion, buying and selling of natural gas futures is something you can successfully do.
You can do this as a long term strategy, and you can also execute intraday or day trading of natural gas futures contract.
It means understanding the key factors that drive or affect the prices of natural gas. These include supply, demand and weather factors among others.
You should create a clear investing strategy to trade in natural gas futures at the commodities exchange. Have a strategy that moves along the market trend for maximum benefits.
To succeed in intraday trading of natural gas futures, you should invest quickly, watch the market trend and be right on timing.