Two Tips for Trading Energy

12.07.2016 • Gold and Natural Resources

From Emerging Trends Trader (Australia)-

Energy is one of the most crucial drivers of global prices and economic activity. When you stop to think about it, you see that everything is either directly or indirectly produced by energy.

The price of energy passes through all products and services. When energy prices rise, commodity, producer and consumer prices all rise too. These are the building blocks of inflation in the global economy. And they drive central bank policies, since the banks are mandated to keep prices stable.

As investors, there are two primary ways to trade energy.

You can trade energy futures on the futures market, or you can trade energy stocks on the stock market. I should probably throw in commodity-dependent currencies as well, such as the Russian ruble, the Indonesian rupiah, and the Aussie dollar, which all fluctuate in line with energy prices to various extents.

Now, there are two key things I want you to remember about trading energy-related assets.

One is that energy stocks largely follow their related energy price, which can be understood by an analysis of the demand and supply conditions of various energy products. It can also be understood by technical analysis.

Two, financially sound companies tend to outperform their peers during both energy (commodity) bull and bear markets. As long as you can nail these two share price drivers, you should be able to trade and invest energy stocks profitably.

Today, we won’t use demand and supply analysis. Instead, we’ll look at some simple technical trends to trade energy…

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