In the natural gas market there is no sure method for knowing the future. However, there are tools and techniques using technical and statistical analysis that provide a rudimentary outlook regarding what the future for natural gas prices might look like.
Generally, when we discuss any information, we more often than not discuss the past. The past is constantly stable, constantly dependable, and usually very deeply researched. Traders however don't trade past, but they can use this information to glean a good idea of what is going to happen in the near future.
Nonetheless, the future is not known. It has no stability or reliability. The scientific approach to predict the future is to infer it from a set of chronicled data. This is true for fundamental and technical analysis as well. In any case, as you understand, past performance isn't suggestive of future results. At the end of the day, there is no certain method to know the future, yet there are methods that can help traders make an accurate natural gas price forecast.
Fundamental analysis is one method for natural gas markets forecasting. For the natural gas markets, fundamental information includes the amount of gas in storage, production levels, weather, LNG exports and imports, the number of working wells in a region or country, electricity generation, heating homes, heating degree days, and so on. The idea is that anything that could affect supply and demand of natural gas is a fundamental aspect of the market.
Fundamentals are challenging though because there is so much information out there, and in most cases, it is hard to tell what and how information will affect prices. This is not to say that fundamentals, especially weather for the natural gas market, should be ignored. Rather, this information should be used to glean a better understanding of the bigger picture while other methods of analysis can be used to make shorter-term timely trade decisions.
Another strategy that natural gas forecast employ is technical analysis. This strategy uses past price, volume, and other market data to glean an idea of whether the market will rise or fall, change direction, or remain in a neutral trading range.
The basic premise behind technical analysis is that the charts of historical data discount everything. This means that if there is information that will make the price of natural gas futures rise and enough traders act upon that information then prices will rise. From a technical standpoint, it does not matter what that information was, but only that prices rose. If no one acts on that information and prices do not rise, then the information had no immediate bearing on the market.
Technical analysis is a vast field of study that has grown exponentially over the past 25 years. There are many techniques that technical analysts use to forecast the natural gas market and make trade decisions.
Software Systems and Tools
With the expansion in technology and advancement in computers and software the use of technical analysis has grown. These techniques have also been combined with fundamental information to create models that provide powerful and accurate natural gas price forecasts on a consistent basis.
These tools come in all shapes and forms, from charting software add-ons, to complex forecasting models, to mobile apps. The takeaway though is that the marrying of technology to technical and fundamental information has given traders and market analysts the ability to create highly accurate and useful natural gas price forecasts.