Before I move on to trading commodities and a look at Australia I want to talk a little about the importance of being a resilient trader. . .
That ability to brush yourself off after a knock, to not take it personally, and to get straight back into the game – it’s one of the things that separates the successful trader from the “gambler”.
As traders, I think we have a lot to learn – I know I do.
Australia’s Resilience and a Secret Weapon: Trading Commodities
The most successful traders out there can take setbacks with the same attitude as their winning trades. Wins and losses are both the natural outcomes of the trader’s situation – each trade is an individual decision, and each has the potential to either profit or fail.
By being objective about trading, we don’t take our individual wins as a badge of pride, nor do we take our individual losses as a sign of failure.
Don’t get me wrong – we’re not robots. Even the best traders will sometimes blow more than they’d intended on a position, or will miss an opportunity because they were distracted by a personal matter. What separates the successful trader is how he or she deals with these moments – how this mistake affects the next trade.
The resilient trader isn’t emotional; the resilient trader doesn’t think “the market is out to get me” or that “my broker has conspired against me”; the resilient trader doesn’t revenge trade. Instead, he or she will get on with the job in hand – making money …
The secret weapon
When it comes to Aussie resilience – mirrored in the strength of the Aussie dollar, despite the $billions damage caused by natural disasters in recent weeks – they do have a secret weapon: Commodities …
One commodity closely tied to the Australian economy is copper. Cyclone Yasi led to the evacuation of refining and port operations in Queensland, which, in turn, saw copper rise to $9,985 a tonne.
Plus, around one-third of Australia’s sugar crop lay in the path of the cyclone – a fact that has caused sugar to hit a 30-year high this week.
Market Maven had already predicted that commodities would be the hot topic for 2011, but I really couldn’t have foreseen the events of this week.
On the other side of the planet, a bitter story of revolution is unfolding across the Middle East, with the only winner so far being the price of oil.
Two months ago, I told you that I expected to see a correction in oil prices -it stagnated for a while, then pushed down to the bottom of its trading channel.
However, this week has seen the oil rebound strongly, with Brent Crude breaking through to the upside of its long-term trend, through the $100 mark. There are two reasons for this: Suez and Sumed – a canal and a pipeline that form two vital “chokepoints” for global trade that run through the heart of Egypt.
And fears about what could happen if these two oil channels don’t run smoothly have been taken to heart by oil traders.
Another one to watch
Of course, there’s another commodity that usually spikes up when we have a helping of global uncertainty: gold.
Having galloped ahead at an incredible rate in recent years, gold, at the moment, appears to be taking a breather. It’s formed a near-on perfect head and shoulders, which is a pretty strong indicator for a reversal.
However, there’s a fly in the ointment of this text-book reversal indicator – what’s going on right now in the Middle East. This kind of uncertainty will usually affect gold prices to the up-side, so – personally – I won’t be throwing all my funds into a gold short just yet!