Commodity Strategies: High-Profit Techniques for Investors and Traders

By Thomas J. Dorsey

Quick Summary

Thomas Dorsey applies his Point-and-Figure charting methodology to commodity markets, providing investors and traders with systematic techniques for analyzing and trading commodities, commodity ETFs, and related instruments. The book covers the construction and interpretation of Point-and-Figure charts, the development of complete trading systems with entry points, stop losses, and price objectives, and the practical application of these methods across major commodity markets including gold, copper, crude oil, and currencies.

Detailed Summary

Point-and-Figure Methodology in Commodities

Dorsey adapts his well-known Point-and-Figure charting approach (which uses Xs and Os to map price movement and filters out time-based noise) for commodity markets. The methodology focuses on supply and demand dynamics as revealed through price action, with specific techniques for setting box sizes, reversal amounts, and scaling that are appropriate for the unique characteristics of commodity markets.

Chart Construction and Analysis

The book covers the mechanics of constructing Point-and-Figure charts for commodity futures and ETFs, including the Reuters/Jeffries CRB Index, spot currency charts (Euro FX, U.S. Dollar Index), and individual commodity contracts. Support and resistance identification, trend line construction (bullish support lines, bearish resistance lines), and the measurement of price objectives using horizontal and vertical count methods are explained with numerous chart examples.

Trading System Development

Dorsey presents a systematic approach to developing commodity trading systems: defining entry points using Point-and-Figure buy and sell signals, setting stop loss levels, establishing price objectives using count methods, and managing position size. The comparison of this trend-following approach with value investing in commodities (which Dorsey also addresses) provides a multi-dimensional framework.

Specific Market Applications

Detailed trading examples are provided for gold (using the StreetTRACKS Gold Shares ETF -- GLD), copper, Swiss franc, Euro FX, U.S. dollar, and crude oil (using the U.S. Oil Fund -- USO). Each example walks through the complete analysis and trade management process.

Broader Investment Context

The book addresses the role of commodities in portfolio diversification, the use of Treasury inflation-protected securities (TIPS) as an alternative inflation hedge, and the broader macro case for commodity investing in an era of growing global demand, particularly from China and India.

Categories

• Futures & Commodities
• Technical Analysis
• Investing

Key Takeaways

• Point-and-Figure charting provides clear, noise-filtered buy and sell signals for commodity markets
• Supply and demand dynamics are the primary drivers of commodity prices and can be read through price action
• Systematic trading with defined entries, stops, and targets is essential in volatile commodity markets
• Commodity ETFs (GLD, USO) make commodity trading accessible to a broader range of investors
• Commodities provide portfolio diversification benefits, particularly as an inflation hedge