Commodities Trading 101 – Do You Know The Basics Of Commodities Trading?
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In this article we will look at some generalities concerning commodities. This introduction will include information on the different types and on different ways they are traded on the market. So let’s take a closer look first at the different types of commodities there are out there.
First before looking at the different kinds, you should understand that there are many different factors that can affect the prices of commodities. These things include taxes, inflation and money supply. Politics, weather, transportation and its costs and technology and its changes can have an effect as well. Other than this the different kinds of commodities affect it as well.
There are two kinds of commodities we will discuss in this introduction:
1) Soft commodities: The first kind is considered . These are the best kinds of commodities to get your hands on if you can. This is because these include agricultural products, such as sugar, cocoa, coffee, that are in demand all over the globe. These types of commodities are primarily affected by price with a little effect from cultural factors as well. The supply for these types of commodities can be most affected by weather, soil, transportation and even insects.
2) Energies: The next kind of commodity is generally energies, such as crude oil or natural gas. Technological and political things affect the supply of these two. On the other end of this type of commodity, demand keeps rising and has been for a long time. This is because a lot of energy is needed for everything to building to heating and powering homes that are already built.
Besides these basics we will look at two different markets they are exchanged in. These include the spot markets, which is more immediate trading for cash or something else of value. Usually this is confined to personal purchases, for example paying for jewelry with cash, that is what is called a spot trade when it comes to commodities. Although a spot trade can happen on a much larger scale, for example with oil or several million ounces of gold.
The other option is a future trade or option. The commodity itself is not traded, but a promise in the form of a contract is. This states what is to be sold and for how much and by what date. Though this type can be more of a risk, it is done more commonly when it comes to market trading of commodities. The risk comes from predicting most of the variables in the trade and how they will behave.
Hopefully this brief introduction to commodities has given you some basic information. Not only what they are, but also how they can be traded. With this knowledge handy, you are one step further along the line of understanding commodities and trading them.
Mike Singh
http://www.articlesbase.com/finance-articles/commodities-trading-101-do-you-know-the-basics-of-commodities-trading-107489.html
what do you think about this article for the school newspaper?
6 Comments
February 3rd, 2010 at 12:50 pm
Commodities Trading?
These days lots of talk about commodities and inflation in CNBC. I did found basic website on commodities http://uscommoditiestrader.com Is there any other good website to know get better idea?
February 3rd, 2010 at 5:52 pm
Commodities trading is not for most ppl. If you are a beginner and starting out, trade commdties options, not futures. Sell long only, don’t short trade. Shorting you can lose a lot more than you put in. You can make a $1000 investment and end up owing $100,000 on the trade and lose your house. No, really, you can. There are several good options packages out there. Email me if you want more info, and no, I don’t sell anything. Thanks.
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February 3rd, 2010 at 5:54 pm
Dont do it! I used to be a commodities trader in grains. The entire world grain industry is run by only 5 huge companies, one of which I worked for. If you think that you can guess what prices will do better than those five, you are wrong, because they control the transportation and the demand.
Get a mutual fund with low fees. If you want to invest, buy a rental property with positive cash flow.
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February 3rd, 2010 at 5:56 pm
I read the other posters answers and the website you have referred. That website states commodities trading can be done like stocks and futures but didn’t said anything about options. Probably we have to look at other places to find about options.
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February 3rd, 2010 at 5:58 pm
make it simple, how much $X you are willing to lose,
then, use $X divided by 5 or 10, this will give you 5 to 10 chances to hit the "jackpot".
then, find out the reliable and low commission broker
then, buy "out of money" calls or puts and record the option expire date
then, set the 50% gain alert in your trading acct
if you get no call from your cell phone two days before the expiration, u lose all ur $$. Make sure u close ur position for calls "Buy open", "Sell close" etc.
If ur phone rings before the expiration date, congrats, u win the jackpot, sell 80% of those contracts and take ur love ones for a nice dinner.
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February 3rd, 2010 at 6:00 pm
Dude try checking out tutorials of:
http://www.investopedia.com
If you have queries then do feel free to email me at
[email protected]
Dude…
Go to:
http://www.geocities.com/kgirishraman/
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