Crude Oil prices are rising steadily from an historically low level. We are in a long-term upward trend in most of the commodity markets. How can this be? When the price of oil is at a historical low, you know that it will not continue to rise.
Once the traders make money on their purchases, they will sell for a profit. Although we have been in a long-term downward trend, the price is still up slightly and moving up. This means we have more room to run. Lower prices are always a sign of improvement, not decline.
One positive for traders is that the bottom has not yet been reached. There are many technical indicators, but most traders do not understand them and are still using base case analysis. We have been in a decline since May and the commodity market was negative for two months. This is normal and traders should not panic.
One thing to remember is that the downward move is temporary. If you are a trader who has used the base case analysis and you see lower prices, do not dismiss them out of hand. Instead, you should review your charts and check for bullish reversal patterns that are forming.
The reversal signs for the commodity markets tend to last longer than the base case signals. These indicators tell you that there is a chance that the market will move back to the upside. As long as you look at the reversal signs, the bullish reversal pattern is likely to show up sooner rather than later.
One thing to remember is that the next break higher in the price of oil will be short-lived. The bulls that use base case analysis will start buying once the break is achieved and they will start selling when the price gets below the previous peak.
It is a good idea to wait for a break before making a trade. There is no need to get into the market before the break is reached. The best trade will be made when the market is breaking higher but reversal signs linger.
The reason for this is that the base case analysis is based on past performance and does not take into account the future. Most traders are still using base case analysis. They are allowing this information to dictate their trading decisions.
In Forex, using this type of trading means you are trading on emotions rather than logic. If you were smart enough to invest in a commodity that had sustained trend movements, you would want to be invested in that commodity. You would use your emotions to determine when to enter and exit the market.
As soon as you enter the market and it breaks, you will want to cash out, even if the previous record highs were short-lived. This is the reason why traders, especially new traders, should not get in the market unless they understand the behavior of the market. Emotions should not be allowed to dictate their trading decisions.
As soon as one of the base case indicators breaks, the traders must consider their trading decisions. It is not wise to rush into the market without studying the past performance of the market. In the long-term, using this type of trading strategy can lead to a winning investment, but in the short-term, it can cost a lot of money.