Most traders that use day trading strategies to buy and sell commodities are unaware that they can analyze weather patterns to determine if they should enter or exit a futures contract. With hurricane season officially beginning at the beginning of June every year and lasting until the last day in November, there is a danger zone for all growing crops along the eastern seaboard down to the southern states and across the Gulf Coast. This area will stretch from Texas to Florida and even points farther north. Additionally, Mexico and the Caribbean often find themselves in the direct path of dangerous hurricanes.
Though the patterns of hurricanes tend to be unpredictable, every year at least a few tropical storms will begin to develop off of Africa’s western coast and start to build up in intensity. As the tropical storm elevates in strength, it begins to concentrate and move westward toward the United States. Based on the position of the contract, there are many potential commodity trading opportunities that could make or lose tremendous profits on the outcome of the hurricane and storms.
And this doesn’t only apply to the agricultural markets. During Hurricane Katrina a member of one of our user groups made fabulous profits in the crude oil market (which was affected by the storm for obvious reasons).
Some of the best day trading strategies includes technical analysis indicators and distinctive weather patterns to determine entering and exiting points of future contracts. Some commodity traders unfamiliar with day trading indicators or proven day trading tools will jump too early to purchase a hurricane trade. Others are just plain willing to take a huge gamble. However, with an effective futures trading system program, there are ways to strategize exactly how to make a move on a futures contract by watching the weather patterns to obtain profitable results.
Even just the threat of a hurricane pattern forming way out into the Atlantic can be enough to spark a rise in a commodity’s price. As the storms grow in intensity, and become concentrated, there is the potential for damage to oil platforms, crops, shipping ports, storage facilities, refineries and pipelines. As the storm gets ever closer to the United States, the probabilities for all types of damage begins to escalate, with prices increasing proportionally.
In theory, this type of event seems simple to analyze. However, hurricanes are often likely to change direction at a moment’s notice, or simply fall apart. In its purest form, the idea that a commodity will make a sustained move to a higher price is not always as predictable as first thought.
To minimize risk, and make better informed decisions, many day traders use proven effective risk management tools and commodity trading software to help analyze all conditions including the weather before entering or exiting their trade.
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