COMMODITY MARKET TRADING and INVESTMENT A Practitioners Guide to the Markets TOM JAMES GLOBAL FINANCIAL MARKETS www.ebook3000.com Global Financial Markets Global Financial Markets is a series of practical guides to the latest financial market tools, techniques and strategies Written for practitioners across a range of disciplines it provides comprehensive but practical coverage of key topics in finance covering strategy, markets, financial products, tools and techniques and their implementation This series will appeal to a broad readership, from new entrants to experienced practitioners across the financial services industry, including areas such as institutional investment; financial derivatives; investment strategy; private banking; risk management; corporate finance and M&A, financial accounting and governance, and many more More information about this series at http://www.springer.com/series/15011 www.ebook3000.com Tom James Commodity Market Trading and Investment A Practitioners Guide to the Markets Tom James Navitas Resources Group Navitas Resources Pte Ltd & NR Capital Pte Ltd 19th Floor, Royal Group Building, Philip Street, Singapore, 048693 Singapore Global Financial Markets ISBN 978-1-137-43280-3 ISBN 978-1-137-43281-0 (eBook) DOI 10.1057/978-1-137-43281-0 Library of Congress Control Number: 2016958281 © The Editor(s) (if applicable) and The Author(s) 2016 The author(s) has/have asserted their right(s) to be identified as the author(s) of this work in accordance with the Copyright, Designs and Patents Act 1988 This work is subject to copyright All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Macmillan Publishers Ltd The registered company address is: The Campus, Crinan Street, London, N1 9XW, United Kingdom www.ebook3000.com I would like to dedicate this book to all my family and friends around the world and I would like to give a special thanks to all the people who during my long career have provided me with the opportunities to develop and offered me the guidance and mentoring to support that development I now hope that through my publications I can succeed in passing on my collected experience and help to support others in their development and career growth Preface Increased competition for natural resources is one of the inevitable consequences of globalization Previously, this has manifested itself mainly in terms of energy security, though in recent years a succession of poor harvests among key producers has even brought volatility and higher underlying prices to global food markets as well The problems inherent in tight supply markets have on occasion been exaggerated further by government actions intended to protect their own national resource security What is different about resource competition in the twenty-first century is its global nature and the speed with which it is intensifying Price volatility has become the new “normal” situation across energy and other commodity markets This volatility presents challenges for the markets and opportunities for investors and traders These opportunities and challenges encouraged me as a commodity market professional to author this book to help investors explore the world of commodity market investment and trading Prof TOM JAMES Unlocking Value in the Commodity & Energy Markets Navitas Resources Group tomjames@navitasresourcescapital.com www.navitasresources.com vii www.ebook3000.com Contents 1 Setting the Scene 1 2 Investment and Trading in Commodity Markets 7 3 The Financial Commodity Markets 19 4 Trading Versus Investment in Commodities 83 5 Hedge Funds and Alternative Investments in Commodities 95 6 Understanding the Fundamentals of the Commodity Markets 109 7 Applied Technical Analysis for Commodities 143 8 Building a Disciplined Trading Approach 173 9 Trade Like a Professional 187 10 Trading Psychology 199 ix x Contents 11 Commodity Market Risk Management 207 Index 233 www.ebook3000.com List of Figures Fig 5.1 Fig 5.2 Fig 6.1 Fig 6.2 Fig 6.3 Fig 6.4 Fig 6.5 Fig 6.6 Fig 6.7 Fig 6.8 Fig 6.9 Fig 6.10 Fig 6.11 Fig 6.12 Fig 7.1 Fig 7.2 Fig 7.3 Fig 7.4 Fig 7.5 Fig 7.6 Fig 7.7 Fig 7.8 Fig 7.9 Fig 7.10 Apex Global Platform 102 Ranking of commodity hedge funds versus other types of asset classes107 The Baltic Dry Freight Index 113 Raw sugar production (tonnes) 116 Water withdrawal as a percentage of total available water 118 Average industrial metals returns and the business cycle, January 1970 to end 2009 126 Uses of copper 127 Copper production 128 Aluminium use 129 Aluminium production 130 Zinc production 131 Global Zinc Demand split 132 Nickel Global Consumption Percentage split 133 Nickel Global Production Percentage split 133 Typical futures bar chart 146 Bulls and bears 148 Bar charts 150 Uptrend or bull trend 1 151 In this illustration the market is hanging around support trendline but does not close below trendline and volume did not increase 152 IPE Brent Crude Oil 152 NYMEX WTI Crude Oil 153 Trendline and breakout 153 Volume associated with the price breakout 154 DOJI formation 156 xi ...Global Financial Markets Global Financial Markets is a series of practical guides to the latest financial market tools, techniques and strategies Written for practitioners across a range of... publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors... Comparison of the cash and future markets of wheat 31 Comparison of the cash and future markets of wheat: weaker-than-expected basis 32 Comparison of the cash and future markets of wheat: stronger-than-expected