If you are an inexperienced commodity trader it is a good bet that you will poorly interpret the news on the commodities markets. The problem is that most reporters have to supply news reports everyday and they are not commodity traders. They need a fundamental reason on why a commodity is moving and it is often just a guess.
Commodity reporters also ask floor traders for comments on why a market is moving and they either get a comment that supports the traders positions or sometimes traders just have some fun with the reporters and make up a reason.
There are also major reports that are released periodically that have a major impact on commodities. Reports like the USDA Monthly Crop Reports are released before the grain markets open and they often cause large movements in corn, soybeans and wheat. Trying to buy off the news as the market opens is often a recipe for disaster. I prefer to wait and see how the markets react to the news before I enter a position.
Having traded the commodity markets for well over 10 years, I can tell you that I’ve been suckered into trades in the early years when I heard a good news story on a commodity. Sometimes I got lucky, but many times I got in just when the market started to turn the other way. Having learned my lesson a long time ago, I now interpret the news with skepticism. Sometimes it will alert you to a good trade, but often it is meant to be faded. It takes experience before you can tell the difference.
