Commodities vs Other financial markets

[Kevin21]

Hey,
on as a generalisation... how do the day patterns of commodities differ to trading other markers like incides etc. I presume that there's more speculation in commodities which would be better for scalping etc, and that the markets are less dependable on each other. For example what happens in soy beans isn't really gonna have a dramatic effect on the price of copper, Unlike the Dow.. starting parties and not turning up themselves....

Just looking into other areas to venture into. All ideas and opinion welcomed


Thanks

kev.

 

[DDI]

i dont trade them much but yes they are independent. So coffee or corn are not interlinked to anything. Bloody Fx and indices affect eachother. I mean the chart of SPX and EURJPY are identical. If you takeaway the axis labels you wouldnt know which is which.

 

[grantx]

Kev,

“commodities...better for scalping...markets less dependable”

These are my thoughts.

How many, and which factors, drive indices? Which are dominant? Sometimes elements drop out of the equation (or become secondary), eg price of oil, strength/weakness of dollar, invasion of Iran or China (sorry, getting ahead of myself).

I would suggest all this can be applied to soft (corn, coffee, etc) commodities but then you need to add the vagaries of the weather, the seasonality of which may (or may not) be changing through climatic change/global warming.

Finally, and most importantly, is liquidity. The greater the liquidity, the better for scalping, eg mini S&P’s, EuroStoxx. FTSE, CAC and DAX may be liquid but it’s a question of being filled – even small lots - at one price. I traded the FTSE years ago but a one-price, three lot fill was indeed momentous. Last week on the EuroStoxx I saw two x two thousand lots go through within minutes at one price (I’d be interested if larger sizes at one price – not vwap - have been seen).

DDI points out the SPX, EUR/JPY linkage. Even a temporary linkage - perhaps ‘correlation’ would be a better term - to another instrument can help in identifying the source for strength or weakness in an instrument. However, beware of the breakdown (LTCM, etc).

Grant.