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Sat, Jun 22, 2024


Introducing NatGas

NatGas is one of the most popular commodities on the forex markets. It stands for Natural Gas and is a major form of energy source. Unlike other forex pairs and commodities, NatGas is not something that can be traded in real life. It only exists for trading on the online marketplace. NatGas is a form of safe-haven asset as when the economic conditions around the world are not looking good, NatGas increases in market value. This is why most people invest in NatGas when all the other currencies are facing a recession. NatGas also experiences some pretty unstable market conditions due to being extremely liquid and having a high trading volume. They, therefore, make a great asset for day traders who benefit from unstable market conditions to perform their scalping strategy. Let’s dive into why this commodity has a lot to offer traders:

Why Trade NatGas

The NatGas commodity can become quite addicting once you’re used to it. Here are some reasons why we recommend trading with one of our favorite commodities. Warning, it’ll make you want to place positions asap!

Safe Haven Asset

One of the many ways a trader first gets into trading this valuable asset is by using it as a safe haven asset. What this means is they usually shift to trading energy resources like NatGas when other currencies or commodities are facing unstable or negative market conditions. Oftentimes in a year, certain events cause most forex pairs to become volatile.

Energy Information Administration EIA publishes a Natural Gas Storage report every week 1

This makes it very risky and close to impossible to earn profit while trading in those market conditions. Due to this reason, traders usually shift to the NatGas commodity as it often experiences great upward trends while others are in turmoil. NatGas is often found at some of the highest market values when other currency pairs are struggling to stay afloat. Due to these reasons, it is known as a safe haven asset.

Market Volatility

NatGas is among the top commodities in the industry. Due to this reason, it faces quite different market conditions than most of the other commodities in this market. NatGas enjoys very volatile market conditions most of the time. This is mostly due to there always being some major economic event happening around the world. It does exhibit extreme instability on occasion when a major event does eventually happen. The worst part is that these moments of volatility are extremely unpredictable. This indicates that experts are already ahead of the dynamic duo and are trying to predict when this major commodity will exhibit volatile market circumstances. As a result, NatGas is quite popular among scalpers, who take advantage of these periods of volatility to make a fast profit.

Market Liquidity

The NatGas market is one of the most liquid markets in the industry aside from EUR/USD and GBP/USD. The daily trading volumes for this valuable commodity signifies just how popular it is among traders worldwide. It is due to these extremely high trading volumes that NatGas experiences some of the lowest spreads and highest liquidity. Explaining this further, a high daily trading volume means that there are a lot of people trading gold on a daily basis. And because a lot of people are trading gold on a daily basis, it is much easier to trade this commodity as there are a lot of people ready to buy it. Markets in such conditions are considered liquid. A high liquidity asset is usually preferred among traders as you have a better chance of earning profit due to constant movement and trades in the market.

NatGas Trading Tips

Whether you’re a beginner or a professional trader, you can never have enough tips to help you in your journey. At the end of the day, liability for any loss gets put back on us so we’ve to be extremely careful in this journey. We’re each here to earn for ourselves while also making sure our fellow traders get to put food on the table too once they decide to trade. Here are some of our favourite tips for trading the NatGas commodity:

Day Trading

Day trading is a trading strategy in which a trade is opened and closed on the same day. All transactions, whether successful or not, must be completed before the market stops. Scalping is a common trading strategy for this trading style. Traders would open a BUY and SELL position at the same rate for the same currency pair. This enables them to profit regardless of how the market evolves. When the market falls, they profit from their opposing position. This strategy is great for NatGas, which may be somewhat volatile at times. Day trading, particularly scalping, is a great way to profit from changing market conditions during times of volatility.

Trend Trading

Trend trading involves detecting trends on trading charts and using them to make trades. Identifying an uptrend and a downtrend are two of the most common patterns that traders look for. These represent bullish and bearish market conditions, respectively. The market is in an uptrend when both the highs and lows climb. The market is in a downtrend when both the lows and highs decrease. Because trend patterns can be identified simply by looking at a chart, this is a simple trading method that everyone can learn. Because NatGas is recognized for having long upward and negative trends, this is a great strategy for this currency pair.

Range Trading

Range trading is the practice of determining when to initiate a trade by using support and resistance levels. The resistance levels are represented by the highest points on a given chart. Similarly, the lowest points on a specific chart are the support levels. Understanding where these highs and lows are located is crucial to the range trading strategy. For instance, if the price is approaching a resistance level and you believe it will hold, you may make a SELL transaction. If, on the other hand, the price is reaching a level of support that you believe will hold, you may execute a BUY transaction. If the price falls below support, you can start a short position because the support level will no longer be legitimate. Similarly, if the price continues to rise over the resistance level, you may go long since the resistance level will be invalidated.

Factors Affecting NatGas

There are a couple of factors affecting the price of the NatGas commodity. Each of these that to be watched out for carefully. Here are some top factors to watch closely:

Time of the Year

The time of the year is an important factor to consider when trading natural gas. In winters, more houses are using heating which increases the demand for NatGas. This causes the price of NatGas to increase as well. Similarly, in summers, the demand for NatGas is considerably lower as not many people are using it for heating. This causes the price of NatGas to decrease as well.

Economic Conditions

When the people in the economy are doing well financially, they are more open to being less frugal with their energy consumption. This causes them to use more NatGas which in turn causes the price of NatGas to increase as well. Similarly, if the economy is in a recession, the people would be less willing to use up NatGas as much as they would like. This would cause the demand for NatGas to fall which would cause its price to fall as well.

The Coal and Oil Industry

The demand and supply of coal and oil play an important role in the market conditions for NatGas. This is because coal and oil are alternatives of this valuable commodity.

AUD Australian Dollar makes higher as Coal exports Sents higher to China as Electricity crisis prevailing in more regions.

If coal and oil are in high demand, NatGas would be in low demand which would make their prices fall. Similarly, if the prices for coal and oil are considerably high, people would be shifting to NatGas for their energy consumption. This would make the demand for NatGas increase which would in turn increase their prices as well.

The Nuclear Energy Industry

Nuclear energy is an alternative energy source than NatGas. Therefore, the market conditions of nuclear energy also play an important role in deciding the market conditions for NatGas. If nuclear energy is in high demand, the demand for NatGas would drop which would cause its market value to fall as well. Similarly, if the price of nuclear energy is relatively higher than NatGas, people would be shifting to NatGas to save energy which would increase the demand for NatGas as well.

Weather Conditions

Weather conditions play an important role in the market conditions for NatGas. This is because mining for these energy resources is done out in the open. Bad weather conditions can disrupt the ability to produce more NatGas which can in turn cause it to increase in value. Similarly, if the weather is great, more NatGas can be produced which decreases its market value.

Production Levels

The level of production is the most direct factor that is impacting the market conditions of NatGas. If the level of NatGas being produced is high, they will be able to meet the supply demands and still have a ton of energy left. This in turn causes the price of this commodity to drop. Similarly, if the level of NatGas being produced is low, they’ll be unable to meet the growing demand of the people which will make the market value for this valuable commodity increase.

Storage Supply

The amount of NatGas that is being held in reserves plays an important role in the market conditions for this valuable commodity. If NatGas is in abundance in reserves, this means the demand is low or supply is high. Either way, it would make NatGas drop in value. Similarly, if NatGas is short in reserves, this means the demand is high or supply is low. Either way, it would make NatGas increase in value.

War Between Nations

Tensions between different nations also play a vital role in determining the market value of NatGas. This is because it causes importation and exportation of this valuable commodity to become rather difficult. If there is unrest or tensions between nations, the price of NatGas would go up as supply becomes an issue. Similarly, if there are no tensions going on, then things run smoothly and supply isn’t an issue. This would cause NatGas to drop in value.

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