Commodities forecast tool
The Commodities Forecast tool determines an average price and an average price channel. The average price is calculated on the basis of commodity price forecasts published by the reputed World Bank. The indicator can be used as a swing trading strategy for commodities.
The price forecasts published by the World Bank can be found here.
This example shows the price forecasts for the energy sources crude oil, coal and natural gas. The forecasts are estimated average prices for the year. The crude oil price forecast for 2017 is currently (Q4 2016) forecast at $ 55,20.
Calculating the average price
Calculating the average price is crucial. Below you can find an example which explains the formula used to calculate the average price. If you do not want to calculate the average price yourself, you can use this table. The table changes on a daily basis. The changes, however, are small. It is not necessary to change the average price in your platform every day.
The formula to calculate, for example, the average crude oil price ($48,48) on 7.12.2016 is:
1. Calculate the difference between the World Bank forecasts for 2016 and 2017.
Crude oil = $ 55,2 - $ 43,3 = $ 11,9
2. Calculate the number of days to go between today’s date and the middle of 2017 (1.7.2017).
From 7.12.2016 to 1.7.2017 = 206 days. 206/365 = date factor 0,564.
3. Delta = $ 11,9 x 0,564 = $ 6,72
4. Average price = World Bank 2017 forecast - Delta = $ 55,2 - $ 6,72= $ 48,48
How to use this tool
A signal occurs when the market price moves outside the price channel. If the market price drops below the price channel a buy signal occurs. Traders only respond to buy signals if the World Bank forecast is above the average price. If the market price moves upwards, out of the price channel, a short sell signal occurs. Traders only respond to short sell signals if the World Bank forecast is below the average price.
This example is based on an average price for crude oil of $ 48,48 (blue line). The World Bank’s forecast is $ 55,50. The trader is interested in buy signals. The channel is $ 48,48 +/- $ 5. The bottom of the channel is $ 44,25. When the price drops below this level, a position is bought. Two buy signals occur.
The settings are simple. They are, as usual, set in the DesignerDialog window.
This example shows the settings for crude oil. The current average price is $ 48,48. The width of the channel is the average price +/- $ 5. The World Bank forecast for 2017 ($ 55,20) is above the average price ($48,80), the trader only want buy signals.
Average price: the strategy’s average price.
Differential_points: the width of the channel, set it to about 10%.
Long_signals: select "yes" or "no" to indicate if you want long signals or not.
Short_sell_signals: select "yes" or "no" to indicate if you want short sell signals or not.
Always select either long or short sell, never select both. Alarms (e-mail, sound or pop-up) are available.