Natural gas

Natural Gas Processing PlantThe trading of natural gas as a commodity is not for everyone. The natural Gas market is infamously volatile, with wild and often unexpected fluctuations in price. In order to trade in gas one must need a sound trading strategy.

Firstly, in relation to oil, the price dynamics of both markets have important differences. The price of crude oil rises and falls in reaction to the whims of investors, from rising in times of market strength to falling in times of risk aversion. Also the infrastructure of oil storage is more globalised than that of gas, this allows investors an opportunity to ride out prolonged periods of short supply. One of the important differences a potential gas investor must take note of is that oil is a more globalised commodity and its price is determined by a myriad of interlinked and international factors. The factors involved in the determination of natural gas however are much simpler. There are relatively few third party or external impacts to worry about. Natural gas is driven mostly by itself and its own supply.

But for potential investors there are lessons to be learned from the volatile nature of the gas market. The first thing you must realise is that the pros can and will get it wrong. Because of the wild nature of the gas market you may be interested in trading the producers of natural gas, this will lessen your exposure to the volatility. Also the timing of your investment is very important. Another lesson is to cut your losses before you risk losing everything. Maybe most important of all is to know that you will make large wins, but you will also make large losses, when this happens it is important that you never let either disrupt your trading strategy.

Read more about some of the other common commodities to trade.