Commodity Long Build Up And Short Build Up

Commodity Long Build Up And Short Build Up

The traders who are now trading in MCX and NCDEX doesn’t want to know the information’s that will help them to analyze the market; in fact, they are not searching any Information that will help them in trading. Mainly in commodity the traders should know long build up, short build up, short covering, long unwinding and selling pressure and also they should know how to use these in the market. Every trader doing commodity should at least know the long build up and short build up.

Reason of Commodity VolatileCOMMODITY MCD AND NCDEX

The commodity market will always be volatile. This is because the commodity market is based on the international market and the number of traders involved in the commodity market is quite high. If you know more information’s then you can easily identify when the market will be volatile. Not only for the whole commodity market, but also you can find it for each and every individual product like gold, Silver, Copper, and Crude etc. By knowing this you can trade with the less stop loss.

How to Identify MCX and NCDEX volatile?

The future which is in long build up and short build up will be ready for volatile. If trading is going high on a particular product and after that we can easily identify how the price of the product will be in the coming days. For that in commodity market, you should know how to use the calculation of the open interest. Long Build Up and Short Build up Long Build up = Increase open interest + Increase Price Short Build up = Increase open interest + Decrease Price For instance, if the open interest of crude oil increases and if the price also get increased then it is long build up and then in coming trading sessions we can assume the price of the crude oil will rise. You should not attempt any short when a product is in long build up. Previously, during the time when crude oil reached 7800 we are easily able to identify that. At that time the crude oil was trading at 4600 to 5300 for some time and one day when it reached 5400 the open interest got increased and the price also increased. The open interest created at that time for crude oil is its life time high. When crude oil reached 6000 then we assumed surely it will reach 7000 and it happens. Here we should know mainly that how much open interest is getting increased that much the price will get increased.

How to calculate and trade with open interest?

For instance consider silver is trading at 38000. Then the open interest of silver is 18000(lot). The next day silvers low is 37850 and high 38450 and the ATP of silver is 38150 and open interest is 18700 for that day. That is open interest has raised from 18000 to 18700 and the change open interest is 700 and this is called as long build up. A future which constructs long build up and closes above the ATP will be good for long trade. The next day for long trade of silver we can buy at 38150 or 38200 which will be good and also we should keep the stop loss as the previous day’s low i.e. 37850. Do not think to trade on different products on each day. Just concentrate on future which has high open interest, because daily the open interest may be volatile and we should keep watching it clearly. In our training class we will explain that information in a detailed way.

Open Interest Logic

Only the open interest will show who makes profit whether the trader who is in long position or short after buying or selling a future. Even the chart will not predict this. You have to go along with the profit makers. If traders who are in short position makes profit then you have to go for short else if long then you have to go along with them. In this you have to learn the entry, stop loss and target. If you are clear with this then you are a star in trading.

Updated: March 31, 2015 — 11:53 am
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