(Transcribed by TurboScribe.ai. Go Unlimited to remove this message.) Welcome back to the Brewing Trades Podcast. This is episode seven, and we've got another exciting lineup for you today. We're diving into two essential topics that every trader should understand. First, we'll explore commodity fundamentals from energy to metals and agricultural products. We'll break down what drives commodity prices and how you can leverage these insights in your trading. Whether you're trading crude oil, gold, or grains, understanding the fundamentals is key to making informed decisions in the futures market. Next, we'll shift focus to trading sessions, Asia, London, and New York. Each trading zone offers unique opportunities and challenges, and knowing when to trade can make all the difference in capturing those key market moves. Grab your coffee, get comfortable, and let's dive into the markets together. Hey everyone, and welcome back for another deep dive today. We're tackling a topic that's both incredibly complex and directly impacts your wallet, commodity fundamentals. We've got some fascinating research and analysis here. I'm excited to break it all down with you and our expert. We're talking about everything from oil and gold to coffee and even cattle. You probably heard the phrase supply and demand, but we're going to go way beyond the basics. Think of it like this. Did you know that a labor strike in a Chilean copper mine could end up making your next electric car more expensive? That's the interconnected nature of the commodity market. It's not just about what's happening in one isolated place. Global events, weather patterns, political decisions, even technological advancements, they all ripple through these markets and ultimately influence the price you pay for everyday goods. I've heard that OPEC Plus recently made some production decisions that are sending shockwaves through the energy market. Can you give us the inside scoop? Absolutely. You see OPEC Plus, which includes Russia, just extended their oil production cuts through the end of the year. This has a lot of analysts predicting that oil prices will remain elevated, potentially pushing above $90 a barrel. This decision is a major power play, especially given that global oil inventories are already at their lowest levels in years. That's interesting because I've also read that U.S. shale producers are ramping up production. Wouldn't that help offset OPEC's cuts? It's certainly a factor. U.S. oil production is expected to hit record highs next year. However, there's a catch. The type of oil produced in the U.S. is lighter than what OPEC typically pumps out, so it doesn't perfectly substitute in every scenario. Plus, the U.S. also has its own economic and political considerations to factor in. It's a bit of a tug of war then. Exactly. And then you have to add in the wild card of China. They're the world's largest oil importer and their economic recovery has been slower than expected. If their demand weakens, it could put downward pressure on oil prices. Regardless of what OPEC does. It sounds like trying to predict oil prices is like trying to predict the weather. It can feel that way sometimes, but by understanding the fundamentals, you can at least anticipate the potential impact of these different forces. For example, let's look at natural gas. While the transition to renewable energy is underway, natural gas is still a critical source for electricity and heating. What's interesting is that the U.S. now has the capacity to export significant amounts of liquefied natural gas, or LNG, to Europe and Asia. This means that U.S. natural gas prices are now much more sensitive to global events, not just domestic demand. So even something like a cold snap in Europe could affect my heating bill here in the U.S.? It's possible. And with winter approaching, that's something to keep an eye on. You see, the amount of natural gas in storage is another critical factor. Right now, those levels are below average, which could make prices more volatile if we have a particularly harsh winter. OK, let's shift gears a bit and talk about metals. I've always been fascinated by gold. It's not just used in jewelry. It's also a key component in electronics. And it seems like whenever there's global uncertainty, the price of gold shoots up. Is that because it's a safe haven asset, like we read in one of the articles you sent? That's exactly right. Gold has historically held its value during times of economic turmoil or geopolitical risk. Some investors see it as a hedge against inflation, meaning that it can help protect their purchasing power when the value of currency declines. But doesn't that depend on people believing that gold will hold its value? What if that sentiment changes? That's a great point. Gold's value is ultimately driven by perception and demand. If enough people lose faith in its ability to act as a safe haven, its price could certainly fall. So it's not a foolproof strategy. What about copper? That's another metal that seems to be everywhere these days. Copper is essential for construction, electrical wiring and increasingly electric vehicles. Some analysts call it Dr. Copper because its price is often seen as a leading indicator of overall economic health. So if copper prices are rising, that means good things for the economy, right? Generally speaking, yes. But we also need to consider supply dynamics. Chile is the world's largest copper producer, and they're facing challenges with declining ore grades and water scarcity, which could constrain future supply. And then you have labor negotiations, like the potential strike you mentioned earlier. Any disruptions to copper production in Chile could send ripples through the global market, impacting everything from construction projects to the price of electric vehicle batteries. That's a perfect example of how seemingly isolated events can have widespread consequences. Exactly. And speaking of interconnectedness, let's delve into the world of agriculture. That's a great segue because I'm a huge coffee drinker and I've noticed the price seems to fluctuate quite a bit. Coffee is a fascinating case study. It's a global commodity with production concentrated in a handful of countries, primarily Brazil, Vietnam and Colombia. These regions are vulnerable to weather events like droughts and frosts, which can significantly impact crop yields and prices. Remember that late frost that hit Brazil a while back? That sent coffee prices soaring. So my morning latte is at the mercy of the weather in Brazil. You could say that. And then you have to factor in things like global demand. As economies grow and living standards rise, more people around the world are developing a taste for coffee, which puts upward pressure on prices. That makes sense. But I've also read that climate change is posing a long-term threat to coffee production. That's right. Rising temperatures and changing rainfall patterns are making it more difficult to grow coffee in some regions, and that could have a major impact on supply in the years to come. OK, I'm starting to feel like I need another cup of coffee just to process all of this. What about other agricultural commodities like wheat and corn? Those are crucial staples, and their prices are influenced by a similar set of factors, whether global demand and increasingly geopolitical events, for example. The ongoing conflict in Ukraine has disrupted grain shipments from the Black Sea region, which is a major breadbasket for the world. So a war on one continent can affect the price of bread on another. That's the reality of the globalized food system. Yeah. And speaking of food, let's not forget about livestock, cattle and hogs. I've noticed meat prices have been on the rise lately. What's driving that? Well, think about it. Raising cattle and hogs requires vast amounts of feed, primarily corn and soybeans. So when grain prices increase, the cost of meat production goes up as well. So it's another layer of interconnectedness. The price of my burger is influenced by the price of corn, which is influenced by the weather in the Midwest and so on. Precisely. And don't forget about transportation costs. Getting those cattle to market requires fuel. So oil prices play a role as well. Wow. It's like trying to untangle a giant web. It can feel that way, but it's a fascinating web to explore. And by understanding how these threads are connected, you can start to make more informed decisions, whether you're investing, running a business or simply trying to make sense of the world around you. It's definitely a lot to take in, but I'm starting to see the bigger picture. One thing that really stands out to me is how vulnerable some of these commodities are to events that seem completely unrelated. That's a key takeaway. You can't just look at a commodity in isolation. You have to consider the entire ecosystem, the global forces at play. Take cocoa, for example. It's the key ingredient in chocolate. And most of it is grown in West Africa. Now imagine a scenario where there's a political instability or a major disease outbreak in that region. Sounds like a recipe for a chocolate shortage. Exactly. And that shortage could ripple through the entire supply chain, impacting everything from the price of candy bars to the availability of your favorite chocolate treats. So a political crisis on one continent could mean a less sweet holiday season on another. That's a pretty sobering thought. But on a more positive note, we've also talked about how innovation can play a role in moderating price increases. That's right. Technological advancements can lead to increased efficiency, new sources of supply and even the development of substitutes. Let's go back to energy for a moment. The rise of renewable energy sources like solar and wind power is a game changer. As these technologies become more cost competitive and widely adopted, they could potentially reduce our reliance on fossil fuels, which could have a significant impact on oil and gas prices in the long run. So investing in clean energy isn't just good for the environment. It could also help stabilize energy prices and potentially even lower them over time. Exactly. And on the demand side, there's also the potential for innovation to reduce consumption. For example, improvements in battery technology could make electric vehicles even more appealing, which could lead to a decrease in demand for gasoline. So while there are a lot of factors that can push commodity prices up, innovation can create counter forces that help keep things in check. It's like a balancing act. Precisely. And speaking of balancing acts, we can't forget about the role of government policies. Governments can influence commodity markets in a variety of ways, through tariffs, subsidies, regulations and even strategic reserves. We've seen that play out with the recent tariffs on steel and aluminum. Exactly. Those tariffs were designed to protect domestic industries, but they also had the effect of raising prices for consumers and businesses that rely on those materials. Governments also play a role in managing strategic reserves like the U.S. Strategic Petroleum Reserve. By releasing oil from the reserve, the government can help increase supply and potentially moderate price spikes. So government actions can have a significant impact for better or for worse. It seems like with commodities, everything is connected to everything else. It's a bit overwhelming, to be honest. How can the average person possibly keep up with all of these factors? It's certainly a complex landscape, but it's not impossible to navigate. You don't have to become an expert in every single commodity. But you can start by developing a basic understanding of the key drivers and keeping an eye on major trends. So what are some key things to watch for? First, pay attention to global economic growth. When economies are booming, demand for commodities tends to rise, which can push prices up. Conversely, economic slowdowns can lead to weaker demand and lower prices. That makes sense. What else? Keep an eye on weather patterns. Droughts, floods and other extreme weather events can disrupt agricultural production, impacting the prices of crops and livestock. So check the weather forecast, not just for your local area, but for major agricultural regions around the world. Exactly. And of course, geopolitical events can have a huge impact. Wars, conflicts, trade disputes. These can all disrupt supply chains and send shockwaves through commodity markets. So staying informed about global events is crucial. Absolutely. And finally, pay attention to technological advancements. New technologies can create both opportunities and challenges for commodity markets. For example, the rise of electric vehicles is increasing demand for certain metals like lithium and cobalt, while potentially reducing demand for oil in the long run. So it's a constant evolution. Yeah. And we need to stay adaptable. That's the key. By understanding the fundamentals, being aware of the interconnectedness of the global economer and staying informed about major trends, you can navigate the world of commodities with more confidence. It's definitely a lot to digest, but I feel like I'm starting to develop a more nuanced understanding of how these markets work, and that's empowering. It is empowering. Knowledge is power and understanding how commodity markets function. It gives you a deeper insight into the forces that shape our world. It's amazing to think that something as simple as a cup of coffee or a chocolate bar can connect us to a global web of interconnected events and forces. It really highlights how reliant we are on these often overlooked raw materials. And it underscores the importance of informed decision making, both as individuals and as a society. Absolutely. Whether we're talking about personal investments, business strategies, or even just making choices at the grocery store, understanding commodity fundamentals can give us a real edge. I'm curious now that you spent so much time studying these markets. Has it changed the way you approach your own consumption? It definitely has. I'm much more aware of where things come from, the processes involved, and the potential risks along the way. It's made me more conscious of the choices I make. And it's also sparked a deeper interest in sustainable practices and ethical sourcing. I can definitely relate to that. Learning about the vulnerability of coffee crops to climate change has definitely made me appreciate my morning cup a little bit more. And perhaps consider supporting coffee growers who are implementing sustainable farming methods. That's a great point. It's not just about understanding the markets. It's about using that knowledge to make more responsible choices. Exactly. And that brings us to a crucial question for all of you listening. Now that you have a better grasp of commodity fundamentals, how will you apply this knowledge to your own lives? Will you approach your investments differently? Will you be more mindful of your consumption habits? Will you seek out products that are sourced ethically and sustainably? These are questions worth pondering. And the answers will be different for everyone. But one thing is clear. The more informed we are, the better equipped we are to navigate this complex world and make choices that align with our values. Couldn't have said it better myself. Well, everyone that wraps up our deep dive into commodity fundamentals, I hope you found it as enlightening as I did. It's been a fascinating journey exploring the interconnectedness of global markets, the forces that drive prices, and the implications for our daily lives. It's been a pleasure sharing this knowledge with you. And remember, the learning never stops. There's always more to discover, more connections to make, and more insights to gain. So keep exploring, keep asking questions, and keep diving deep. Until next time. And that brings us to the end of our first topic, commodity fundamentals. Understanding what drives the prices of crude oil, gold, and other key commodities is essential for futures traders. And we hope you found the breakdown helpful. Before we move on to our next topic, I just want to take a moment to thank you, our listeners, for your continued support. Whether you're a seasoned trader or just starting out, we're here to provide actionable insights to help you grow. If you're enjoying the show, don't forget to subscribe to the Brewing Trade Podcast on Spotify, YouTube, or wherever you get your podcasts. And don't forget to share it with your trading community. Now, let's shift gears and dive into our second topic, trading sessions. We'll explore the unique characteristics of the Asia, London, and New York markets, and how to optimize your trading strategy for each session. Let's get into it. Hey, everyone. Welcome back for another deep dive. Glad to be here. Today, we're tackling how the global Forex and futures markets work across all the different time zones. It's going to be exciting. Right. Because most of us aren't up at 3 a.m. checking on the Nikkei. Yeah, good point. So we'll break down the trading day into those key sessions, Asia, London, and New York, and we're going to, like, unlock the secrets of each one. Exactly. Those characteristics that can really make a difference in your trading. So let's get started. First things first. The Forex market never sleeps. It's true. 24 hours a day, it's moving from one financial hub to the next. Kind of like a relay race with the baton passing from Tokyo to London to New York. That's a good way to think of it. Yeah. But what makes each of these legs unique? It's all about the volume and liquidity. Those two factors really determine the personality of each session, and that impacts the volatility and opportunities you'll see. So it's not just about knowing when it opens and closes, but really understanding the vibe. Let's start with Asia. What sets the tone for the Tokyo session? Well, the Tokyo session is like the early bird, midnight to 9 a.m. GMT. Okay. It's usually known as the less volatile session, but don't let that fool you. Right. Some traders actually really thrive in these calmer waters. Like who? Well, think about those who focus on range bound markets or use algorithms. Right. Their systems might work best in a more predictable environment. Got it. So less fireworks, more like calculated precision. Absolutely. And this ties into the influence of Asian markets. Totally sure. Currencies like the Japanese yen, the Australian dollar, and the New Zealand dollar are front and center. And then there's China, always living in the background. A force to be reckoned with. Yeah. One move from China can impact decisions all over the globe. Wow. I can see traders glued to their screens, watching every announcement from Beijing. It's true. So which currency pairs and futures contracts are we looking at in Tokyo? The big ones are USDJPY, AUDUSD, and NZDUSD. Makes sense, given the region. And for futures, keep an eye on the Nikkei 225 in gold. Even with the reputation of being a quieter session, there are moments when Tokyo can heat up right. Oh, definitely. What are some of those data releases or events that can really shake things up? Economic data out of both Japan and China can be huge. Like what? Well, especially the Bank of Japan policy announcement. Oh yeah. Those are market movers. They don't just impact the yen. They ripple out and affect risk sentiment for all sorts of assets. It's incredible how one announcement can set off a chain reaction globally. It's true. Okay. We've gotten our taste of Tokyo. The early bird. Now let's head to London. The heart of Forex. What's the energy like when the London session kicks in? If Tokyo is the early bird, London's the bustling marketplace. Oh yeah. 7am to 4pm GMT and it's nonstop action. I bet. That's when you see liquidity and volatility really take off. Makes sense. I hear London's like the place to be for Forex. It attracts everyone, the big institutions like banks and hedge funds, and of course, retail traders. So a real mix of everyone. Exactly. What else drives all that activity? Well, it's also when you get a ton of European economic news. The data releases. Especially the UK, Eurozone, and other European countries. What comes out in the morning can have a big impact and create lots of opportunity. It's not like London's where you got to be on your toes. Always ready to react to the headlines. So which currency pairs and futures contracts are king in London? London is all about the majors, USD, GBP, USD, but the cross pairs get a lot of play too. Like which ones? Year AGBP, year AJPY, and let's not forget European futures contracts. Yeah, those are important. Things like the DAX 30 and the FTSE 100. I've heard of those German and UK markets, right? You got it. Now you mentioned earlier how London overlaps with New York. Ah, yes. The overlap. Why is that overlap so important? How does it change things? Picture it. The two most active sessions coming together, it's rush hour for Forex. Wow. Liquidity and volatility go through the roof, especially for those major pairs like EUR-ISD and GBP-USD. Breakouts are more likely, trends accelerate. It's really exciting. And probably a little nerve wracking. Definitely. So we need to stay super aware during that overlap. Small moves can become big moves fast. Okay. We started with the quiet precision of Tokyo, then the bustling energy of London. Definitely a contrast. Now let's cross the Atlantic and land in New York for the grand finale of the Forex trading day. Sounds good. What's the vibe when New York takes over? This is where Wall Street steps in 12 p.m. to 9 p.m. GMT. High activity, especially during that London overlap. Right. But the focus shifts. How so? It all becomes about the U.S. economic indicators. Makes sense. So traders are glued to the U.S. economic calendar. A hundred percent. Think reports like non-farm payrolls, GDP reports, and of course the Fed announcements. Oh man, those Fed announcements can cause chaos. They're huge. They don't just affect the dollar. They affect global risk appetite and currency values all over. I can just imagine traders holding their breath, waiting for those numbers to drop. It's like a collective gasp. How does the volatility in New York compare to London, especially with that overlap? It's definitely most intense in those early New York hours while London's still going. That's like peak Forex. Got it. Once London closes, things calm down some, but it's still way more active than Tokyo. A gradual easing of intensity as the day goes on. It's a good way to put it. Before we dive deeper into those overlaps, what are the key players in New York? Which pairs and futures are the ones to watch? The stars of the show are the USD majors. EURUSD, USDJPY, GBPUSD, especially when those big U.S. reports drop. Okay. You'll see lots of action in commodities futures like crude oil and gold. Makes sense. As well as stock index futures, the S&P 500 and NASDAQ. They're great for gauging overall market sentiment. Gotcha. And don't forget Treasury futures. Those are tied to interest rates and can really move the dollar. So it's a pretty diverse mix reflecting the global reach of the U.S. economy. Exactly. Now we keep mentioning these overlapping sessions and I'm fascinated by them. Break it down for me. Why are these overlaps so unique? Okay. So first you have the Tokyo-London overlap. Early morning GMT. Right. It's quieter compared to the other overlap. Right. But watch out for bursts of volatility in IUD, USD and USDJPY. When would that happen? Usually around unexpected news from Japan or Australia. So even though it's calmer than London, New York, it's still a time to pay attention. For sure. Okay. Bring on the main event, the London-New York overlap. This is at peak Forex. Why is it the most action-packed? You have the highest concentration of trading volume and liquidity. Traders from both sides of the Atlantic are active, breakouts, trend accelerations, big price swings. It's all happening. That's exciting. It is. But remember, it's high risk, high reward. So we got the rhythm of each session. The heartbeat of the market. We know how to manage risk, but how can we use all this knowledge to our advantage? What strategies can we use? We'll get into all of that and more when we continue our deep dive. It's not just about knowing when those sessions start and end, but aligning your trading strategy with the specific characteristics of each session. So it's like matching your approach to the personality of each market. You got it. So let's get practical. How can we actually use this? One strategy is session-based pair selection. Interesting. So instead of just trading our favorite pairs whenever we feel like it, we need to be more strategic. Exactly. Think about when those pairs are most likely to move. Give me an example. Okay. Let's say you like trading USDJPY. Well, we know that pair is really influenced by Japanese data, and it's most active during the Tokyo session. Right. That makes sense. So that's when you'd prioritize trading it. So instead of swimming as a current, we're riding the wave of peak activity. Precisely. And the same logic applies to the other sessions. You're a USD, London's your prime time, USDCAD, New York. It's like choosing the right tool for the job or the right session for the pair. What other strategic insights can we get from this global market view? Another cool concept is session carryover. Session carryover. Yeah. You watch trends that emerge in one session and see if they carry over into the next. So if I see your USD trending up in London, I might anticipate that continuing into New York, especially during that overlap. Exactly. It's like momentum, capitalizing on the energy from the previous session. That's a cool concept. But of course, no strategy works all the time. We still need to look at other factors, right? Oh, absolutely. Things like technical indicators and always, always risk management. Right, right. Of course. Speaking of risk management, we all know those economic data releases can really inject volatility into the market. So how can traders use those news events to their advantage? News trading can be really exciting. Gotta have a plan. First, you need to know when those reports are coming out and how they might impact different pairs. So basically we need a forex calendar with all the major events highlighted and a game plan for each one. That's the idea. Take the US non-farm payrolls report, for instance. Yeah, the NFP, big one. Right. It tells us about the health of the US job market and usually drops on the first Friday of every month during the New York session. Okay. So we need to mark those dates on our calendar. Are there any tools out there that can help us stay organized and informed about these news releases? Oh, for sure. There are a bunch of online economic calendars that show you all the upcoming data releases and even give you some insight into how they might impact the market. Nice. Super helpful. So we've touched on scalping, which happens a lot during that crazy London, New York overlap. But what about other trading styles? Do they match up with certain sessions or levels of volatility better? Good point. Beyond the scalpers who thrive on those quick moves, you have day traders. Right. They're in and out within the same day, riding those intraday waves. Exactly. Then you've got swing traders. They hold positions for a few days, maybe even weeks. They're aiming to catch those bigger swings in the market. So they're like riding the tide, not just the waves. Exactly. And then you have the position traders. They're in it for the long haul. Right. Holding for weeks, months, even years, trying to profit from those major market shifts. It's really interesting how those different trading styles almost mirror how people approach life. You know, some like the fast pace and others are more patient. That's a great observation. Trading is really a reflection of individual personality and risk tolerance as much as it is about market dynamics. Speaking of risk tolerance, let's talk about managing risk because that's essential in such a volatile market with all these different time zones. Right. How do we do it? You're absolutely right. Risk management is fundamental to successful trading. It's all about protecting your capital. One of the most important tools we have is the stop loss order. Right. The good old stop loss. Can you remind us how those work and why they're so important? Sure. A stop loss order tells your broker to automatically close your trade. If the price hits a certain level, it's basically your safety net. So you set a limit for how much you're willing to risk on any given trade. Yeah. Prevents those emotional decisions that can wipe out your account. You got it. And they're especially useful when things are really volatile or when you can't watch the markets all the time. Okay. That's a good reminder. What about position sizing? Isn't that another big part of risk management? Absolutely. It's about figuring out how much capital to put into each trade, not just when to trade. Right. So it's about balance, weighing the potential reward with the acceptable risk. Any other tips for managing risk, especially with this global market we're dealing with? Diversification is key. Spread your risk around. Don't put all your eggs in one basket. Exactly. Trade different currency pairs, try different strategies, even look at other asset classes. This way, if one trade goes bad, it doesn't sink your whole ship. That makes a lot of sense, especially in Forex where things can change so fast. You'd it. So we've covered a lot of ground here, but I want to leave our listeners with a question. Okay, shoot. Knowing what we now know about trading across these different time zones, what steps can our listeners take to optimize their trading schedule and their risk management plans? How can they make it all work with their own goals and lifestyle? That's a really great question. Trading really is a personal journey, one that requires self-awareness and understanding your strengths and weaknesses. We all have different goals and different lifestyles. So figuring out how to make it all work is a key part of the journey. Absolutely. Make sure to join us for part three of our deep dive, where we'll explore even more advanced strategies and insights to help you master trading across time zones and really elevate your trading game. Okay, so we've talked about the rhythm of each trading session. The heartbeat of the market. And how to manage risk. Yeah. But you mentioned some advanced strategies. Yeah, now that we have the basics down, let's dive a little deeper. I'm ready. One really powerful tool is order book analysis. Order book analysis. Okay, I'm listening. It's like looking into the brain of the market. Whoa, okay. You're seeing the real-time buy and sell orders of all the other traders. So I'm not just looking at the price chart, but the actual forces of supply and demand. Exactly. And that lets you spot those key support and resistance levels. Oh, those are important. Yeah, the price points where there's a lot of buying or selling pressure. Right, like magnets or barriers for price action. You got it. And it can help you predict breakouts or reversals. So I can use it to time my entries and exits better. Precisely. This is really cool. It feels like taking things to a whole new level. It can be a real game changer. Are there any platforms or tools that make order book analysis easier? Most trading platforms these days offer some kind of order book functionality. So I don't need any fancy software. Nope. Your regular platform should do it. Okay, cool. What other advanced tricks do you have up your sleeve? Let's talk about sentiment analysis. Okay, sentiment like the mood of the market. You got it. How do I analyze that? There are a few ways. You can read news headlines, check social media. There are even special sentiment indicators. So I can figure out if the market's feeling bullish or bearish on a certain currency. Exactly. It's like taking the market's temperature. That's right.