Beginner’s Guide To Natural Gas Trading Profits!

| December 5, 2014 | 0 Comments

natural gasNatural gas is one of my favorite markets.

However, the commodity is notoriously tough to trade. In fact, some professionals call the commodity the “widow maker” due to intense volatility and sudden market turns based on weather.

Let me tell you- nerves of steel and a keen eye are required to consistently catch natural gas profits. 

If you’re willing to accept those truths, today I’m giving a brief explanation of what information you must watch to participate in this market.

Let’s get to it…

EIA Natural Gas Inventory Data

Each Thursday at 10:30 am EST, the US Energy Information Administration (EIA) releases essential information regarding US natural gas supply levels. Investors and energy market analysts are looking for how much of the commodity entered/exited US storage facilities from week to week.

Obviously, the time of year determines storage inflow or outflow trends.

If it’s the winter heating season, traders are looking for how much natural gas withdrew from US storage facilities. If it’s summer, investors are keeping tabs on how much of the commodity was injected into inventory.

Using weekly EIA data, investors compare current inventory levels and injection/depletion rates to last year’s data and 5- year averages. Data variances from seasonal norms are used to create a bullish, bearish, or neutral thesis for prices.

Weather Forecasts

If you’re going to trade natural gas, you must keep a close eye on the weather.

Since it’s a mainstay fuel for utilities and individual consumers alike, temperature fluctuations affect natural gas demand. A great place to keep tabs on seasonal temperature forecasts is the Climate Prediction Center provided by the National Oceanic and Atmospheric Administration.

You’ll find it here-

http://www.cpc.ncep.noaa.gov/products/predictions/814day/index.php

Temperatures play a very large role in buying and selling activity in the natural gas market. Departures from seasonal norms can send the market sharply higher or lower, depending on the season and the ongoing supply/demand situation.

Let me be clear…

Natural gas trading can be challenging because meteorologists are never 100% accurate with their forecasts. 

In other words, natural gas price swings can be just as fickle as the weather!

Technical Analysis For Natural Gas Trading Profits

As you may know, technical analysis is the study of price charts. And like most commodities, technical analysis plays a very large role in natural gas price movements. It’s essential you study price charts if you expect to have any chance of profiting in this market.

Technical analysis is a very deep subject that takes time to master. I don’t have time to cover all the details today.   However, you’ll find articles on the subject here.

There you have it…

Like any trading endeavor, you’ll need a strategy before you risk real money in the markets. When it comes to natural gas trading, the information sources above are essential to developing your strategy and eventually collecting profits. 

Finally…

There are two ways to trade the natural gas market- futures and ETFs.

I recommend you stick to ETFs due to the inherent risks of commodity futures trading. Not only do you have to learn a whole new trading lingo with futures, you must accept high levels of risk. I only recommend futures to traders who are very experienced.

For the beginner, the US Natural Gas Fund (UNG) is a great way to start profiting from price swings in natural gas.

Until Next Time,

Justin Bennett


BIO: Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com. With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them. Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.

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Category: Natural Gas

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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