Hobofinance.com

Listed below are the top five hobofinance recommended free commodities futures websites.  If you trade or invest in commodities futures it is essential to have accurate up to date information. This doesn’t mean hanging on every piece of news issued; it means reducing your information intake to consistently actionable information and ignoring the rest. Below are my top five recommended free commodities futures websites (I pay for only one information service not listed here that gives a weekly update on soft commodities.

DailyFutures.com
This website is an excellent source for commodities fundamental information (information on supply and demand and changes in macro economic trends). The commodities are clearly organized by category and are presented with a longer term fundamental picture. Supply and Demand numbers are given for a several years running along with stocks to usage ratios and ending stocks. These last two figures are particularly important when making comparisons to previous years. Many analysts will compare current ending stocks (the quantity of a commodity after demand figures have been subtracted from supply) for a commodity to years past where that same number was considered a record high. But if consumption has grown rapidly in recent years you only get the full relevance of that ending stock number in its relationship to usage. While a certain quantity of stock may have equaled six months of usage 10 years ago it may only equal one month at today’s demand numbers.

This website also does a better job than most at sorting through the schizophrenic news reporting that permeates the media. It doesn’t play both sides from day to day as you’ll find most places. The news is about as clean and actionable as I’ve found anywhere. Though I visit this site daily, I take it with a grain of salt. I don’t trade based on news, but I follow the news to track longer term developments. If you can cut the news out altogether from your research, you are a stronger person than I…and smarter.

The Coffee Traders Forum
This is a hidden gem. I assume it’s hidden because there are few regular contributors to this forum, but those who are, are quite active and quite good. Most of them trade big and you’ll find a plethora of trading strategies; day traders, options sellers, long term position traders. And to top it off, they’re all nice. I’ve asked for them explanations of various concepts or technical terms many times and have always been treated kindly with ample explanation and encouragement. These guys don’t only trade Coffee as the name suggests. Most of them also trade precious metals and there are a few farmers who frequent the forum and discuss hedging strategies for their crops and other agricultural commodities. The one category that doesn’t get a lot of talk there is livestock, but perhaps it will as prices continue to climb over the next 2 years (I’m betting on it).

Commitments of Traders
This website will take any beginner a long time to appreciate. I wish someone had pounded into my head the importance of following commercial traders’ positions; it would have made and saved me a lot of money. Now it is one of the two or three most pivotal indicators I use for entering or exiting a trade. Commercial traders are users or producers of the physical commodity, not hedge funds or speculators. This group of traders has deep pockets, first rate information, and is not looking to take big risks. They trade these markets to reduce the risk of significant prices fluctuations on their commodity. These companies are massive producers or suppliers and you can bet they have the best information in the industry.

When looking at these charts it is not as meaningful to see commercial interest shorting the market. Producers sell this market early to secure current prices for their commodity. If the price of the commodity rises, their product becomes more valuable and cancels out their futures position. When prices fall, their physical commodity looses value but is hedged by shorting the futures markets. But when you see commercials very long, or very short a particular market, you’d better take notice. They’re telling you something. Why would an industry be net long a commodity, if that industry is made up of both buyers and sellers who need protection on both sides? Answer: prices are offering a margin of safety and tightness is bound to occur in the future. Producers are not hedging their longs with short positions and consumers are buying up product early before the impending price climb. We may not have access to all the best information, but they do, and they show us the conclusions they’ve drawn from it. Trade with the whales, and make whale profits.

Futures Buzz.com - Seasonal and Long Term Charts
This is yet another factor of trading I overlooked for far too long when I began trading. Seasonalities are tendencies for futures prices to rise and fall at a given time of year due to natural changes in the production and consumption cycle. There are two sides of this coin, those who believe that seasonality is dead because seasonalities are known and known information is already factored into the market, and those who believe that seasonalities can’t or won’t be factored in before hand. After my first two years of trading, I went back and analyzed my major trades for mistakes. Most of my entries were alright, but my biggest losses could have been avoided if I sold at the onset of seasonal downturns. This was so noticeable I felt sick and vowed not to overlook them again. The irony is that the news is always bullish at the onset of seasonal weakness. I followed the news, I lost. When prices bottomed for the season, the news was bearish (negative) rather than bullish (positive) and I’d stay away out of fear, missing the best buying opportunities.

Examples of strong seasonalities include the proclivity of RBOB gasoline prices to rise rapidly into Memorial Day, only to stagnate or fall back afterwards. People anticipate summer driving demand and this is all priced in before the driving season begins. Coffee prices plummet 90 percent of the time in June, at the onset of the Brazilian harvest (largest Arabica producing nation). May is a period of product tightness and the news is generally supportive, luring newbies in with high hopes of Brazilian frost and tight supplies only to fleece their hard earned money from them. By learning these tendencies and something about production and consumption cycles you’ll have an edge against anyone who follows the news.

This website also contains long term charts. These are not a common reference point, but they are extremely important when entering a long term trade. Most people only observe the five month futures charts, some traders go out to a year and a half. Looking at 30 year charts gives you a grand scope on long term price trends and ideas of relatively cheap and expensive prices. What may look like a strong bear market on a yearly chart, may look like a market correcting to its long term trend line on a thirty year chart and actually be a great long term buy. If I am going to hold a trade anywhere from 5 to 18 months, I always take a look at a long term chart before hand.

Commodity Charts and Quotes
And last but not least, a charting website. Every trader and investor needs to look at charts. If nothing else they tell you when a commodity or stock is relatively cheap and when it is relatively expensive. This website gives you three angles, a daily, monthly and yearly chart option along with several technical indicators. It uses what I consider the five most valuable technical tools out there: moving averages, MACD Histogram, RSI (relative strength index), volume and open interest. I should warn however that the open interest graph at the bottom of each chart seems chronically incorrect. For open interest (total number of open contracts) refer to the commitments of traders website mentioned above. The cumulative positions of commercial, large, and small traders is the open interest figure. For the other four tools just mentioned, I highly recommend Alexander Elder’s ‘Trading for a Living’, one of the hobofinance top ten books to increase your financial literacy.