Commodity Trading

If you’re looking for various trading opportunities, then you should know that the world of commodity trading offers so many deals that most certainly you’ll find the right one for you if you know where to look.

People make trades on the market or on certain sectors only with the help of trading commodities. In time the commodity market has developed considerably and now even a few schools decided to introduce online commodity trading courses in their curriculum. Most courses are full-time but there are also other ones that will only last a few days.

By joining these courses, you will use modern tools and software to learn as much as possible about the commodity-trading playground and understand the important of contracts and the role of sectors trading. After completing the course you can use all that information to control your orders in the commodity market and in time become successful traders.

The courses are teaching the people how to spot a profitable investment and how to avoid any risky transaction. In the commodity market the traders can use various types of contracts depending on the traded commodity.

Also, the students will find out that the commodities are traded 24-hours a day, 5 days a week and some of them have a preset time period.

To sum up all the above, online commodity trading courses will tech discipline, technical tools and a successful plan to anyone that’s interested in this field of work.

Anyone can attend these courses from beginners to experts you can always learn something new that will help you along your way. The courses comprise both continuing and advanced education programs and from time to time you can even learn a few tricks from the best traders in the country because the school invites them to assist the courses and to teach the students discipline and financial preservation.

The teachers will offer their help and you can ask them to guide your first steps in commodity training.

Online commodity trading and futures trading are by-words today. But this was not the scene always. The original marketers belonged to the 1800s. They were just farmers who wanted to sell what they had grown on their agricultural lands. Crops would be harvested, and produce brought to the market for sale.

Not having the educational services available in modern times, they were not able to judge whether the goods that they had brought were sufficient or less in quantity. If the quantity was not sufficient for the buyers, the farmers lost an opportunity to make more money. If there was excess quantity, produce like crop products, meats and dairy products would have to be carted back home. In time, they would rot and spoil. Either way, whether there was a surplus or a deficiency, the farmer suffered losses.

Sometimes, a certain produce would be available off season, but not in as large a quantity as it would be if available during the regular season. Naturally, the products made from this were sold at high prices.

Ultimately, many heads got together to come up with the idea of a common or central marketplace. Farmers would bring their harvests here on certain days and sell them. The buyer could take them as immediate delivery (today, it is called spot cash) or order them as a future delivery (today, known as futures market).

The result of this endeavor was setting of standard prices for different commodities (in season and off season), plus giving an indication to farmers about demand and supply. Thus, spoilage of produce was brought to a halt and farmers no longer incurred huge losses. This can be seen as the stepping stone to the online commodity trading and futures trade that exists today!

Foregoing all that happened between now and then, looking at online commodity trading now as it exists, what are the considerations to be kept in mind if someone wants to go in for it?

(1) The first and foremost point regarding online commodity trading is having an intelligent grasp of how markets function (physical or online) and how contracts are drawn up for futures trade.

(2) Whether involved in online commodity trading or futures trading, there has to be a manufacturer of goods and a consumer of the same goods. One is the seller and the other is the buyer in the contract.

(3) Trade today has gone from agricultural produce and food products to much more, including financial instruments. So the trader has plenty of business options.

(4) Online commodity trading differs from futures trading in that goods may have to be handed over physically. A receipt is issued to the customer, enabling him/her to go to the warehouse and pick up the products.

(5) Another type of contract that has come into being is the futures contract. This has evolved from a forward contract, which is nothing but a buyer signing an agreement to pay for and purchase goods at a specified date some time in the future (generally, the time limit is three months from the date set on the contract). The goods will be delivered on that future date.

(6) According to the agreement, the buyer is getting a commodity not yet available. The price is of course, decided beforehand. Sometimes, the commodities are priced according to future values; stock market indices act as decision-makers for the value set on a particular commodity.

(7) Another aspect of futures trading is that neither the seller is the actual supplier of commodities, nor the buyer the actual user of the goods purchased. Only if the person is personally involved with the actual commodity purchased, will he/she provide and use it.

(8) Futures contracts are useful for both sellers and buyers because risks are minimized, plus the parties get the opportunity to indulge in a little bit of speculation. There is no exchange of physical goods.

(9) Different strategies are available for spot traders as well as future traders, to make use of rising and falling prices to their best advantage. These strategies can be classified as–spread, going short and going long.

(10) For the same commodity, the prices specified in two different contracts may not be the same. The businessman tries to use the price difference to his advantage. This is called a spread.

(11) Going short indicates that the trader is wondering if he/she can gain a profit from falling prices. The contract is therefore sold at a high price now, to be re-purchased at a lower rate in the future.

(12) The last strategy for online commodity trading or futures trading is going long. Here, the investor and the speculator sign an agreement where the buyer is ready to purchase the product at a pre-set price. He/she is anticipating that the price may rise in future, yielding further profits.

The prime rule for successful long-term investing is to have a diversified portfolio. To most investors, when talking about diversification, usually implies that diversification is by type of investments and type of assets. But the real foundation of the concept is correlation. If two investments are highly correlated, they move pretty much in tandem. When investments are weakly correlated, they move generally in the same direction but not equally as fast or as far.

When investments are negatively correlated, they move in the opposite direction of each other. If we design a portfolio that is too highly correlated, we run the risk of having too many eggs in one basket. That’s ok when things are going in the right direction but really bad when things are moving against you; that’s why having investments that vary in correlation is important. And that is why having some commodities in your portfolio makes sense. You see, commodities are negatively correlated with equities and bonds. That is to say, if equities are moving down, commodities are normally moving up and vice versa. This helps to smooth out returns over the long term.

A recent study of correlations between different investment types showed that commodities were negatively correlated with all normal forms of equity investments (stocks, bonds, mutual funds). But even more impressive from the standpoint of portfolio construction and optimization, commodities have shown a 5 year average return of 13% and that does not include the recent run-up in commodities in 2007 and the first half of 2008. So, this means that commodities are not only negatively correlated with equities but also provide for average returns equal to or superior to the returns of the general equities markets.

No doubt, when most investors think of commodities, they think of crowded trading pits, chaos, confusion and stories of millions lost and made in the time it takes to eat your lunch (or have it eaten by traders on the other side). Moreover, the idea of a long-term investor, who usually buys and holds for an extended period of time, trading commodities sounds very much out of character. And indeed, it is.

But without going into the peculiarities of trading commodities, there are ways for more conservative investors to participate in commodities without having to trade them. And as we have seen, a limited exposure to commodities is good for asset diversification and risk reduction because commodities are negatively correlated with most other investment types.

So, what are some of the ways for a non-commodities trader to invest for the long term in commodities? First of all, an investor can invest in commodity related companies such as found in the energy, chemicals and precious metal sectors. Secondly, and growing in popularity, is to invest in managed commodity funds. However, in both cases, it’s a good idea to seek professional guidance when choosing one of these options.

Yes, even though the commodities bull is out of the barn, it’s not too late to add some commodities to your portfolio. It’s a solid strategy over the long run. Today, many investment professionals feel that energy and agriculture sectors are particularly attractive for commodity investors but over the long term, there is no doubt that raw materials will always play an important part of the World economy and their negative correlation with equities make for a good balance in any portfolio.

So, the answer to the title of the article: Should You Invest in Commodities is a resounding, YES!

Author: William Hutchens
Article Source: EzineArticles.com
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If you are a first-time trader, the easiest and most useful avenue to choose for yourself is commodity trading, with its myriad choices. It is an upcoming avenue for investors who are looking to earn a lot of money, with an extremely comprehensive and unlimited list of products which can range from agricultural products to petroleum and consumer products, or even currencies.

It is only natural with the advent of technology that commodity trading now takes places on the world wide web as well. Online commodity trading is quite the rage, especially with first-time traders.

It is advisable for novices to begin with seven to eight commodities – this ensures the two fold purpose of proper monitoring and remaining on the safe side. Since commodities are tracked online everyday, it makes sense to have a reasonable number of commodities, especially in order to truly understand the hows and whys of the market. Not only novices but experienced traders too opt for no more than eight commodities because the simultaneous tracking of more than eight is a confusing and troublesome job.

Online commodity trading, in essence, is no different from a classic trading environment. The trading floor and the broker along with all the basic principles of trading apply to online commodity trading too. The only difference is that the trading is going on online.

If you are a novice commodity trader and are looking for a sure-fire formula to help with the management of online commodities, you will be disappointed. You should be extremely careful as to where you click because that one click could prove fatal.

If you don’t want to or can’t handle online commodity trading directly, it is possible for your chosen executor to hold an account, as long as you use a written power of attorney. This executor must be extremely reliable because trading involves making very important financial decisions and in this case you are handing over this power on your own behalf to the executor.

If you would prefer to work in a group as opposed to trading individually, then you can join commodity-related mutual funds and commodity pools similar to limited partnerships. You can make this even easier for yourself by simply going through online commodity trading exchanges. You can offset risks in your whole portfolio by combining the low-margin markets of commodities with stocks and bonds investments. This is one of the major reasons why commodity trading is so useful.

You have to be really careful while making financial decisions online, although the basic principles behind online commodity trading and classic commodity trading are absolutely the same. Just don’t let the simplicity and ease of the Internet blind you from making well informed and smart choices when it comes to your finances.

The easiest answer for this question is: anyone who does not mind being in a riskier market. In fact, the commodities market is reputed to be so volatile that fortunes can be made or lost in a matter of minutes or hours, if you don’t know what you are doing. To get a better understanding of investing in the commodities market, let us take a look at some of the basics.

What is a commodity?

A commodity is anything that can be bought or sold. Examples of a commodity can include oil, gold, oranges and currency. When you invest in commodities, you are basically betting on what the market will do. You will bet that the price of oranges will rise or that the value of the dollar will fall.

Investment strategies in commodities

Most financial experts do not recommend investing anything in the commodities market that you can not afford to lose. It is not the investment type for someone who wishes for a safe investment for their retirement account, unless you put your money into a managed account.

However, if you do not mind higher risk in return for the greater chance of higher returns, commodities might be a good option. Commodities are a great way to use a portion of your portfolio in higher risk/higher return investment, but should never be used as a major segment of your portfolio.

Safe investing in commodities

If you really want to take your turn at commodities investment, but want to minimize your risk, take a look at commodities funds. Because these funds include a mixture of different commodities, the risk may be minimized by the very nature of the portfolio.

If it is riskier, why would anyone invest in commodities?

The return, when someone wins in the market, can be extremely high. There have been a number of millionaires made through commodities trading and will do so again in the future.

In addition, it has long been understood that the commodities market is a great hedge against inflation. When inflation unexpectedly hits, the commodities funds tend to do a lot better.

Finally, commodities are always in demand. Gold, oil and currency will always have a market because we need them. They will never become outdated and the demand will never disappear.

Investing in commodities may be the perfect investment for anyone who doesn’t mind using a small portion of their portfolio in higher risk activities in order to achieve a higher reward. If you do not have the time to follow markets and industries on a day to day or hour to hour basis, checking out the commodities funds are the next best thing.

Author: Caterina Christakos
Article Source: EzineArticles.com
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The economy of any country depends on several factors, and one of them is “trade”. The trading business has a tremendous global impact, and that is why the international community gives it so much of importance. As a matter of fact, trade has been seen to effect the political and social scenario of a particular country as well. This change has come about as a result of globalization, industrialization, great strides in the methods of transportation, World Web, and the coming up of multinational (production and services offered in more than two nations) companies. And now we see the birth of commodities trading brokerage firms too!

A unified organization called the WTO or World Trade Organization has also been set up by the trading community. This international body is in charge of bringing out rules and regulations concerning the international trading system. Additionally, disputes between two trading countries can be brought to them for resolution.

How much international trade has progressed can be understood by reviewing the statistics on exports and imports–

(a) Germany is said to be the leading exporter of world trade merchandise with an overall exports share of 10%. The United States exhibits 8.9% share, followed by China with 6.5% share, Japan with 6.2% share and France with 4.9% share.

(b) Where world trade merchandise import is concerned, the leader is the United States with a 16.1% share on overall imports. Germany is next with 7.6% share, China with 5.9% share, both France and United Kingdom with 4.9% share, and Japan with 4.8% share.

The research figures presented above are enough to prove how high international trade is rated by the international community. Again, changing trends in international trade impact current trends in local markets. This is especially visible where commodities trading is concerned. And that is why commodities trading brokerage firms are on the rise.

The effects visualized on commodities trading when the international market is affected, are–a probable lull in trading activities, changing values on particular commodities, a change in the efficiency of the traders and brokers, plus an impact on the various trading mediums that are in operation. The commodities trading brokerage firms are not unaffected either.

To give a more detailed commentary on commodities trading brokerage firms–

(1) They are major links between those who buy and sell commodities. The transactions are conducted via different exchanges. Since they take up the responsibility of executing all orders, they charge a small fee as commission.

(2) This does not mean to say that they command no standing in the trading community. They do! They are ready to share their expertise with major investors/traders on a professional basis. Their consultations cover the demand and supply scenario, “hot” commodities and current market dynamics.

(3) Commodities trading brokerage firms deal with all kinds of markets, ranging from industrial to agricultural and from options trading to futures trading. Currency trading and stock markets are also part of the package!

(4) There are well-established commodities trading brokerage firms that give value-added services as part of the deal. Those clients who are desperate for success are bound to take up what is offered! Value-added services constitute market intelligence and analysis, ensuring greater chances of profits. Of course, these services do not come free of cost–they are quite expensive!

(5) Thus, for the investor/trader who is passionate about commodities trading, it is advisable to take the help of commodities trading brokerage firms. The commissions to be doled out seem very small in comparison to the huge profits that he/she can get in return for listening to good advice!

Commodity Trading is strictly speaking the trading of physical commodities – such as soyabeans, wheat, corn, gold, silver, cattle, oil etc. – or their futures contracts on the established commodity exchanges.

Farmers use commodity trading to lock in favorable prices prior to an ensuing harvest. Hence, there are real commercial reasons for trading in commodities. However, they are also traded for pure speculation by private traders seeking to make a commodity trading profit by speculating in the price movement over their chosen time-frame.

More than any other type of speculation, such as forex or stock trading, commodity markets involve a very high degree of seasonality. Hence, it is important that the trader be very aware of the underlying cycles affecting the market in question.

That said, commodity trading can be done successfully by giving a very high degree of emphasis to the price charts alone. The commodities trade extremely well according to technical analysis methods. For example, Fibonacci price retracements and time cycle analysis work extremely well on commodity charts. So too do other technical indicators such as moving averages, price gaps, support and resistance points, trendlines and so on.

Trading commodities can be an extremely volatile and unpredictable business because these markets are known for their sudden and sustained price surges and collapses. Compare a long-term commodity chart of something like soybeans or oil to any stock index and you will see the difference. Hence, it is vital in commodity trading that you are extremely disciplined in your approach and employ strict money management rules. A good stop loss order, placed in the market at the time you place your trade, is a must.

Traders also play the spreads between commodities, which is an extremely popular form of commodity trading, and which effectively multiplies the range of profit opportunities hugely. Examples of spreads is the wheat-corn spread, where traders speculate on the relative price of one to the other. Other spread opportunities occur in the price differentials between different delivery months of the same commodities’ futures contracts. Hence, you might buy the contract nearer to expiration and sell the one further out with the expectation that long-term prices of that commodity will fall with respect to near term prices.

Once you also realize that there are active options contracts in all the major instruments, it becomes clear that commodity trading is a very desirable niche within the universe of speculation.

As with all forms of trading, mental and financial discipline are key factors to success in commodity trading. Given their extreme volatility, it is paramount that you have a proven method before you ever speculate a single dollar in these often unpredictable markets.

You must also remember that these are real physical products involved, and they can literally be delivered if you fail to close out your position before the expiry of the commodity future or option contract. Otherwise, it can result in a truck pulling up outside your house with your delivery of soybeans, live cattle or cocoa – depending on what you have been trading. This has been known to happen!

That said, the opportunities present in commodity trading are huge and exciting. These are markets that see some real action, and you also have the pleasure of knowing that you are trading in real world items, which can give your trading a whole new meaning.

A market that conducts business with commodities of all nature are referred as Commodity markets. At the Initial Stage Occurrence of Commodity market was meant only for agricultural products which was predominantly affecting the local market. But when the crucial factors such as Industrialization, Globalisation, Technological advancements breaks barriers and came across the boundaries it virtually increases demand from consumers and intense competition from other players has paved way for commodity markets.

Commodity markets basically deals in the trade of commodities like gold, cotton, crude oil etc. Many items both perishable non-perishable, finished goods, raw materials and semi finished goods are been traded in this market at the international level. Even Commodity market does not necessarily require you to buy or sell the commodities but you can even exchange them too.

Commodity market works on certain predetermined principles which says that trading has to be done only for standard products. Secondly that transaction should takes place through a future contract. Accordingly, contract says that commodities will be sold or bought on a future date. However the price at which they are sold will be the price agreed during the contract. Similarly commodity marketing also makes use of another type of contract called spot contract. In this contract the goods are been transferred as soon as the contract is made. However it has also been argued that the purpose of a spot contract is to exercise a future contact in due course of time. Some of the commodities investing market are commodity food market, commodity petroleum market and commodity fund investing.

Investing in Commodities

At the Initial, Commodity investing was widely encountered merely by a few sectors. It was first restricted to the trade and exchange of commodities and then was meant for regular and day to day use. However the awareness by the occurrence of the stages has brought all sectors together into the manifold of commodity investing and numerously has enabled speedy movements, transfer and transaction of goods and services.

The following are the benefits of investing in commodities market-

Reduced Risks

As an investor, Involvement of risk factor are merely very less if it comes to invest in commodities. Therefore the gains which you acquire from commodity investing balance other losses due to other financial instruments in your portfolio. The chances of risks are less because commodity investing primarily deals with diverse items. However if at the mean time, if the contracts entered for a future date you can exercise reasonable care and can also see to it that the chances of risks are reduced or nil.

Helps to Fix Price Easily

However the accomplishment of Commodity market can be easily monitored by analyzing the performance of bond and share market. In most of the cases,Commodity market will perform well when the others do not perform and vice-versa. It is therefore possible to give Future prediction regarding the prices and make the contracts by considering the ups and downs in other markets. A prior condition for that would be that the assets in the commodity market should not be correlated with the stock and bond market.

Author: Shanu Chhabra
Article Source: EzineArticles.com
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Commodity trading is a battle between return and risk. Because of the leverage involved, you can achieve a higher rate of return than from most other forms of investment, but at a higher risk. Commodity trading is speculative, involves a high degree of risk, and is designed only for sophisticated investors who are able to bear the loss of more than their entire investment.

You should keep in mind that past performance is not necessarily indicative of future performance. Commodity trading is just one step in solving the complex agriculture problems. Interestingly the concept of futures trading started from farming when a French wine merchant started locking prices for his wine produce even before his grapes were ready.

Commodity trading is speculating on the future price movements of the basic raw materials on which global trade is based. The two most traded commodities are oil and coffee; however, all the other basic materials are also included in this market. Commodity trading is reaching an all-time high in popularity. Although many individuals are able to make a profit with futures trading, there are also those who end up losing money. Commodity trading is a big arena, just like the stock market.

Commodity trading is a risky venture and in order to produce profits takes some real education and a sound trading system. Most commodity traders seem to fight the markets in an attempt to gain profits quickly only to find the market to continue sideways or travel in the opposite direction.

Commodity trading is based on leverage, and the power of leverage is what makes people rich. Commodity trading is the one area of the financial markets where any person with tenacity, risk capital, and discipline can be highly successful. BUT there is also considerable risk of loss, particularly for the uneducated or misinformed.

Commodity trading is simply buying commodities (such as gold, or silver or platinum) as a tangible asset. When inflationary pressures are strong (and interest rates are low), these can give a better return on investments. Commodity trading is not inherently risky. It is only as risky as you want to make it according to the amount of leverage that you use. Commodity trading is a zero sum or cash business. Your trading account is settled at the end of each trading day with your trading account balance changing daily.

Obviously, unlike having money in a CD, this type of investment can lose as much or more than is gained. Another advantage of using commodities is that the commissions are much lower than with other investing, such as in mutual funds. Obviously, if you run out of money you will be forced out of the market and will lose the lion’s share of your capital allocated for that trade. In an extreme situation, such as if wheat was linked to cancer in humans, then obviously if we were long wheat we would most likely get out and take the loss.

Futures trading is economically beneficial because it facilitates better production planning in the agriculture and agro-based industries. In these sectors it is also utilised as a hedging device against violent movement in the price of commodities over a period of time which, in the case of agricultural produce, stretches over crop seasons, often from sowing to harvesting time. Futures trading grew by leaps and bounds making the most of the bull-run witnessed globally. Fueled by the rally in equity markets, stock market players jumped into commodity markets to leverage on the all round boom.

Future trading includes widely traded commodities like coffee, oil, gold, sugar or financial instruments like stock market indices, bonds, or currencies. Futures and options markets are risk management tools, helping to offset the exposure of contracting to supply a given amount of commodity ahead of harvest time. The commodity exchanges in practice seem to be less a way to spread risk, and more a way to concentrate profits for those who know the most about a market.

Futures contracts allow speculators the right to buy or sell a specified quantity of a commodity at a contracted price before an expiration date. Less than 3% of all futures contracts result in physical delivery of any commodity, the majority of all contracts are liquidated before expiration.

Do not try to trade commodities without a good foundation of commodity market knowledge. In getting started it is best to focus on just one or two commodities. That will be enough to keep you good and busy for a long while.

Trading online commodity futures is an option that speculative risk seeking traders can certainly consider. Not that trading commodity futures online is for the faint of heart or for the under capitalized. Commodity price levels can and do often move in a dramatic fashion. If you decide to trade online commodity futures you should be sure to use only true risk capital to fund your commodity brokerage account. Then for goodness sake take the time to learn at least the basics about trading commodity futures online before putting real money at risk.

One advantage in trading commodities to consider is that the very nature of commodities means that they will always have at least some value. It is highly unlikely that the producers of crude oil, gold, coffee, corn, wheat, sugar, or any other commodity will start giving them away for free. So unlike trading in stocks in companies, which can go bankrupt leaving stock investors holding the bag with worthless stock, commodities offer at least some downside protection.

A common problem in trading commodities, as it is in so many trading vehicles these days, is that many traders use too much leverage to carry commodity positions. For example, a 100 oz. contract of gold at $1,000 an oz. would have a total value of $100,000. The margin, or good faith deposit, to place 100 oz. of gold in your account may be only $10,000, or ten percent, of the total contract value. The use of too much leverage is the number one reason that so many traders will lose at the commodity trading game.

The imprudent commodity trader, being very bullish on gold, may decide to buy ten contracts in their $100,000 trading account. This would be great if gold moves straightaway to $1,100 an oz., as a profit of $100 an oz. on 1000 oz. of gold would be $100,000. Such a move would double the money in the account. However, if gold declined by $100 an oz. to $900 before moving to $1,100 the unwise trader would be wiped out unless he/she could promptly meet a margin call from their commodity broker and place additional capital into the account.

By trading online commodity futures the trader has access to a great deal of current information, real time prices, and fast executions of commodity orders. This is a clear advantage over trading in the old pre Internet days. However, by using too much leverage in trading the commodity account, that is carrying too large positions relative to the size of the account, the trader sets up the very real potential for heavy losses.

Trading online commodity futures has its advantages but traders must be very careful in deciding how much rope to use in the form of leverage. The use of all of the leverage offered by online commodity brokers is usually a sure way to end up with losses in your account.

The use of all of the leverage available from commodity brokerage firms and not holding enough cash in reserve is the number one mistake made by novice commodity traders. As the old saying goes you should be sure to do “everything in moderation, even your own excesses”.

Author: Gerald D Greene
Article Source: EzineArticles.com
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A key component of technical analysis and perhaps one of the oldest indicators around, moving averages are time-tested and affective indicators. There are many types of moving averages with varying indicators, but the primary purpose of all types of moving averages remains the same. Their purpose is to reduce or remove noise from the daily price movements and attracted trends of stocks, commodities or any thing you can plot or chart.

Moving Averages: How Do We Use them?

Moving averages identify trends and trend reversals, give a measure of a commodities’ strength, and help you arrive at support and resistance levels. Essentially, moving averages are indicators with lag, which is to say that they do not identify new trends but are useful in trend following. One of the most useful ways in which you can use moving averages as buy or sell indicators, is to have three moving averages running at the same time on the same chart. The idea is to have a short, an intermediate and a longer term time frame. When the first two move upwards and cross above the longer term one, it indicates an uptrend and one can buy. The reverse happens if the first two move below the third moving average. In that case, you can sell, as the commodity is in a downtrend. A good example of this would be a 10, 20, and a 30 day period moving average, plotted on a commodity chart.

Moving averages are also used by traders to determine support and resistance of a commodity. When the commodity reaches a moving average and struggles to move above it, you might have found resistance. If a commodity stops falling at a key moving average, it can be deemed to have found support. A prime example of this is a 200 day moving average, which is used to calculate long-term trend directions, and to find support and resistance in them.

Types of Moving Averages

There are different types of moving averages. The simplest one is the simple moving average (SMA), which is calculated by taking the normal arithmetic mean of a specified set of numbers. The exponential moving average (EMA) is calculated by giving weightage to more recent data. The EMA is regarded to be a better moving average compared to the SMA. Both of these moving average variants become very useful when used for trend following with moving average crossovers. Indicators such as the moving average convergence divergence (MACD) and Bollinger bands use moving averages as key components. The MACD shows the price divergence of two moving averages, by subtracting a 26 period EMA from the 12 period EMA. A third 9 period EMA is used to give us buy or sell signals when it moves above or below this MACD. Bollinger bands, so named after their creator, use two standard deviations plotted away from a 21 period SMA.

Whichever way you look at it, one cannot deny that using moving averages by themselves may not make you a millionaire in a hurry, but are brilliantly useful in helping you follow trends and plan your commodity trading strategy.

Following recent hikes in oil, gas, copper and wheat prices, commodities have once again come to the focus of the investment community and the average person on the street. What affects the supply of oil? How important is weather for grain prices? Why have copper prices skyrocketed? Is it worth investing in commodities? How can I hedge my commodity price risk?

Commodity Trade and Finance looks at the economics of key commodity groups, including energy, agriculture and metals. It examines the supply/demand fundamentals of several major and minor commodities, physical characteristics, production an consumption patterns, trade flows and pricing mechanisms. It also covers, in brief, the main tools used to hedge price risk, such as futures, options and swaps.

Outline and Contents:

Section 1: Energy

Energy economics

Oil history

Oil pricing

Gas

Steam coal

Section 2: Metals

Iron, cooking coal & steel

Copper

Aluminium

Minor base metals

Section 3: Agriculture

Economics of agriculture

Grains & oilseeds

Softs: coffee, sugar, cocoa

Fruits, vegetables & livestock

Forest & paper

Each chapter will contain information on

Physical characteristics

Main producers and consumers

Main exporters and importers

Physical market organisation (pricing, agents, contract types, etc.)

Why you should purchase this book:

It puts together a wealth of information for all key commodities, together with economic analysis

It offers an indispensable reference text for those who are interested in commodities, or about to embark in a relevant career and want a solid academic background in the area.

It is written in non-technical, easily readable language, suitable for all audiences.

For more information kindly visit

http://www.bharatbook.com/detail.asp?id=63771

Even in the present economic climate, with the markets fluctuating wildly, many people and companies are still making money by investing in commodities. For amateur investors, though, the commodity market can be daunting: while the workings of the stock market are known at least in part by most laymen, the commodity market is less understood. For the beginner wanting to learn how to trade commodities, knowledge of the basic aspects of commodities and the commodity market is essential.

Commodities are basic traded goods with a number of common properties. They have traditionally been primary goods; that is goods that have not been processed. Examples of this are wheat and copper. They also have internationally agreed quality standards: this is important because traders might buy and sell commodities without even seeing them and having the chance to test them. Since commodities have agreed standards which are verified by officials in the particular commodity exchanges, the commodities can be quickly and efficiently sold and transferred. Further to this, commodities are always traded in certain standard weights or volumes, such as tons, bushels or troy ounces. All of this means that there is no haggling over either quality or quantity: traders can base their decisions on market conditions and other external factors affecting price.

There is a wide range of commodities, and they can be split into groups. Agricultural commodities encompass grains, pulses and other similar farmed products: examples are soybeans, cotton, wheat and sugar. They are usually traded in pounds (lbs), tons or bushels. Other farmed goods that are traded fall into a different class: livestock and meat commodities. Traded in lbs, this group includes such goods as frozen pork bellies and live cattle. Energy commodities involve the different versions of oil and gas traded on the international commodity exchanges, and are sold in barrels and British Thermal Units respectively (though ethanol is sold in gallons). There are two groups of metals: precious metals and industrial metals. The former group includes metals such as gold and silver, and are traded in troy ounces; the latter group includes copper, zinc and tin, and are traded in metric tonnes. There are also a number of commodities that do not fall into any particular group: amongst others, these include palm oil and polypropylene.

But when trading commodities, it is not enough to know what commodities are: an intimate knowledge of the commodities being bought or sold is essential. A large number of factors can affect the price of each individual commodity, including supply and demand, weather conditions, natural disasters, government policy, advancements in technology and more. It is strongly advised that anyone wishing to trade in commodities researches thoroughly first.

Author: Mike Drabble
Article Source: EzineArticles.com
Provided by: Guest blogger

You are considering the trading of commodities, or the options on futures as a wonderful way to supplement your income. You can even go one step further and determine that trading commodities and futures is a wonderful way to make a living. This is a great idea! The futures can only go two directions; up or down. All one needs to do is determine the commodity direction and jump on board. What could be easier?

The next logical step is to find a place to execute your trades. You begin by going to the internet to find commodity and futures brokerages. You quickly discover that there are many futures brokerages offering a number of services to the commodity trader. Through your research you discover there are three basic levels of service futures brokers provide to commodity traders, which are full-service, discount, and online futures trading. Through more intense research you find out the very cheapest means to execute your trades is through online trading. Generally speaking the majority of beginning commodity traders will opt for online futures trading because it is normally the least expensive choice. Also, there is the sense of independence when online trading because one can place their own trades, bypassing a commodity desk clerk or futures broker.

The next thing needed is to call several futures brokerages and negotiate the cheapest online commission possible. It has been my experience over the years that beginning commodity traders spend a great deal of time and effort negotiating a commission rate. I believe the primary reason new futures traders spend so much time looking for the cheapest commission rate is because it is what they understand best. By this, I mean when they were young they saw their father haggle with the car salesman to get the the very best price for the new car and mom scouring the weekly grocery ads to find the best price for needed groceries. It is what we all have been exposed to all of our life. This approach is fine for most endeavors but probably the very worst approach to take when establishing a commodity trading account. As explained earlier, pursuing a cheap commission rate is what a new futures trader understands best.

We will now explain the sensible approach to take for a commodity trader when opening a futures trading account. The very first thing one should consider once they have decided they would like to trade commodities is to find a broker that they feel comfortable working with. A commodity broker who has the years of experience, understands charting analysis for the many commodity markets, and also incorporates seasonal tendencies into their futures analysis. Many commodities such as gold and silver have strong seasonal tendencies, not just the agricultural commodities. Make sure the commodity broker you are considering will take the time to work with you, teaching you futures chart analysis, provide you seasonal information, and generally speaking, increase your overall trading knowledge, so you can become a successful commodity trader.

Please keep in mind that the leverage when trading commodities is tremendous. For example; the margin required in your trading account to hold a Corn futures contract is $2100.00. Corn futures pay $50.00 per one cent of movement. You purchase a Corn contract and it moves twenty-five cents in your favor the very next day, your profit for that one Corn futures contract would be 25 x $50.00 = $1250.00. That is almost a 60% return on your original investment, which in this case was the margin money that was required for you to hold a Corn futures in your commodity trading account. That is some significant leverage! The tremendous leverage associated with commodity contracts is the very reason why you need a well qualified, professional commodity broker to work with you, assisting you in improving your trading skills.

Finally, when deciding on a broker to work with, go to the National Futures Association website and check out the history reported by the NFA for the broker you have an interest in working with. Also, check out the Futures Commission Merchant that your commodity broker clears his trades through. This only takes a few minutes of your time and you can verify that your broker is licensed and registered with the proper authorities and does not have a history of poor trade execution.

Author: Jack Case
Article Source: EzineArticles.com
Provided by: Guest blogger