Commodity Trading

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For 16 years, The Hightower Report’s Commodity Trading Guide has been recognized as one of the best research and reference tools in the industry. This annual publication contains an impressive amount of valuable information for anyone involved or interested in the commodity and financial future markets. Anyone from the individual investor to the commercial producer/end user can find useful information in this encyclopedia of commodity market knowledge. For every maj… More >>

Commodity Futures Trading Guide 2010: Almanac, Calendar, Encyclopedia, Yearbook 16th Edition

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This fascinating book is loaded with practical information designed to help you in the commodity market. The author’s method…proven by his million dollar success…does not involve complicated math or subjective evaluation. There are two completely systematic methods; %R and Momentum. The essence fo these methods is that they tell you if the super powers are long or short; when the super powers expect a major move to start; what commodities are in true bull or … More >>

How I Made One Million Dollars … Last Year … Trading Commodities

Segregating commodities into different types makes it easier for traders and investors to compare price. Apart from making commodity trading convenient it also makes it easier to research in the commodities. There are different types of commodities that trade in the commodity markets; however knowing a few essential ones before you are commodity trading is important. It will help you make choices on what you want to trade in and commodities that are much more profitable than the rest.

Let’s look at some very common commodities that are generally traded in

Energies – One of the most influential commodities that are traded in is energy. It consists of different products that give out energy to heat and power up homes and business. The commodities that make up energies are heating oil, petroleum, crude oil, natural gas, propane, coal etc. the prices of these commodities are fixed depending on the contract volume.

Grains – The second most traded commodity are grains. This includes grains like rice, soybean, wheat, corn etc. It also consists of a few agricultural produce.

Softs – This commodity includes cotton, sugar, cocoa, coffee and orange juice. The CSCE which is the Coffee, Sugar and Cocoa Exchange are the ones that are most commonly exchanged. However oranges are not traded in its own type, the reason being that a huge percentage of it (80%) are traded as a frozen concentrate. The FCOJ (Frozen Concentrated Orange Juice is one thing that even the New York Cotton Exchanges trade in.

Livestock – Livestock also most commonly known as meats is traded commonly in the commodity market. This includes pork lean hogs, cattle etc. The place where the primary livestock is trades is the Kansas City Board of Trade (KCBT) where the exchange takes place. The volatility of this particular commodity is much less as compared to the others. However this particular commodity also depends on grains to a small extent, since livestock feed on grains.

Financials – Financials also regarded as US Treasury Bonds, CBOT etc fall under this category. It also consists of exchanging trades stocks as financial commodity.

Metal Trading – Metal commodity trading is probably the most widely traded commodity in the commodity trading market. You can infact bifurcate metals into several categories like precious metals, non precious metals, scrap metals, alloys, base metals etc. Here is a list of some of the most commonly traded metals in the commodity trading market.

* Precious Metals – This is the most widely traded metals. The metals are gold and silver and its prices are traded in dollars for an ounce. Other precious metals that fall into this category include platinum, Iridium, Palladium, Phodium, Ruthenium.

* Base metals – These are metals that are known to oxidize and even corrode with the slightest reaction with acids. Metals that belong to this section are lead, zinc, aluminum, nickel, copper and tin.

* Carbon Steel – Carbon steel is a metal alloy that does not contain much of alloy materials apart from carbon. It is a combination of carbon and iron and has very low carbon contents and has similar properties like that of iron.

* Metal Scrap – This is nothing but left over metal that still has the potential to be reused for any other purpose. There are several traders who trade in scrap metal since it is easily available, and has a good potential to let you earn profits.

The common understanding about commodities is that they are generally non processed products that are bought and sold in the commodity trading market.

The best thing of commodity trading market is that it is much more profitable than investing and trading in bonds and stocks. Commodity trading can be done by anyone who wants to invest and manage an extensive portfolio.

The general understanding about the commodity trading futures market is that it is a very complex and difficult to analyze market. However on the other hand it is not so! Infact there are a few basic facts that people need to know of which will change their perception about what the commodity trading futures market is and how they work.

The basic knowledge is that the commodity trading futures market or the exchange market as it is known is a public marketplace where the sale or purchase of commodities takes place. These sales and purchases are done at an agreed price so that commodities are delivered at a specified date. The broker is a person who needs to do the purchase or sales of the commodities. The broker is also a part of the organized exchange and the deal is completed according to the terms and conditions as given in the standardized futures contract.

The main thing that distinguishes the futures commodity trading market and a commodity market where commodities are bought and sold is that the futures market works with the help of contract agreements that follow a standard procedure. These agreements are responsible for delivery of a particular commodity at an amount as specified for a future month. It does not include the immediate transfer of commodities ownership.

In short the buying and selling in the commodity trading futures market does not need the buyer or the seller to be the owner of the particular commodity that they are trading for. With futures the main concern is receiving the delivery or making the delivery of the commodity, however the futures should not be bought or sold during the month of delivery. The previous sale also can be cancelled at any time with respect to the equal offsetting sale. If the sale is cancelled before the commodities delivery month then the trade cancels out completely. In this case the commodity is not received by the buyer or delivered by the seller.

In reality there is only a very small percentage very specifically less than 2% of the total of all futures commodity trading contracts that are settled or entered into through the deliveries. A larger part shows that there is a lot of cancellation of deliveries of commodities even before the delivery month in the manner that is described above.

This forms the basic mechanics or the functioning of the commodity trading futures market.

We all know what Commodity Trading is about, and if you are looking for a simpler way of trading in the commodities market then there is none better than Commodity Trading systems. These systems are nothing but mechanical ways of trading in commodities. However these systems have a definite entering and exiting rule for trades which every trader learns off. Learning these rules is simple as they are plugged into the trading systems program. These also help in monitoring the data as well as prices that the commodities undergo. These price triggers form the basis of the buy and sell signals of commodities in the market.

There are several professional commodity traders now who make use of this online trading system. The most important factor of online Commodity Trading system is that trading is devoid of any kind of emotion. This makes it possible for traders to only trade in commodities based on strategies that will help make it a successful trade. Implementing trading strategies that are successful will help you follow a disciplined strategy of trading in the commodities market. It also leaves behind the headache of reworking a trading strategy just so that you are successful as a trader in the commodity market. It will also prevent the trader from making wrong trading decisions and most important the ones that do not fit your style of trading

Commodity Trading systems are generally built over technical indicators and these could be either stochastic, moving averages, breakouts of 20 day highs or lows and even RSI . There are a lot of trading variables that traders use to trade in the commodities market, and any of these variables can be used to make the system robust. However if you are looking for a good Commodity Trading system you need to make sure that you choose one that is built from simple programs. Even pro traders will agree that using a Commodity Trading system that is simple is much more beneficial and easy to use than the complicated ones.

The two types of trading systems that form the basis of every Commodity Trading system is the Trend following and the range following systems. The one makes the best use of markets which are established in either downtrend or uptrend is the trend based system. The range based system on the other hand assumes that since most of the markets are not trend markets, it makes it easier to buy when the commodity is at a low range and sell when it is at a higher range.

If you talk to your financial advisor about whether or not you should become a trader in the commodity market, chances are that they will steer you away from this idea and instead recommend that you maybe put your money into stocks or bonds in order to achieve decent growth. Is this because you cannot achieve decent growth on your money by buying commodities? No, rather this is because of the inherent risk and volatility when trading in the commodity market, as well as the fact that smaller investors do not have as much direct access to commodities as they do to stocks and bonds.

However if you have decided that you would like to commit at least some of your money to the commodity market, the vehicle that most people would be familiar with is a futures contract. This type of commodity trading is called direct exposure, and it is risky because most futures contracts are traded on margin as well as the fact that betting on any one single commodity can be risky due to the volatile nature of how rapid price changes can occur.

Minimizing Risk With Indirect Commodity Exposure

While there is nothing inherently wrong with trading commodity futures contracts, and indeed if you really know what you are doing you can reap great rewards from trading on margin in this fashion, for a large percentage of people they are looking for a way to get consistent returns without the risk of losing their initial investment. The answer to this is to enter into the commodity market with indirect exposure using mutual funds, which can be a smarter and safer way to access the gains associated with these markets while minimizing as much risk as possible.

There are dozens of mutual funds that buy and sell futures contracts linked to individual commodities, and very often these funds will trade across a basket of different related commodities which is much safer than trading a single individual commodity. Putting your money into these funds instead of directly into the futures contract can help to give you consistent growth without any sharp decline in value. Another even more indirect way to trade is to find the mutual funds that buy and sell the shares of different companies that are directly involved with the production of certain commodities. While this is the least risky approach, it is also true that you will not benefit from the full upswing in value if the market moves favorably in your direction.

Gold, Silver and Precious Metals: Betting Against The Economy

Gold and other precious metals are unique commodities because they fly in the face of traditional logic when it comes to deciding which commodities to buy. If you consider the example of corn, timber, or steel, you would buy each of these commodities when the economy is in full gear and all of these commodities are being used heavily, so the price will stay high or go higher. However gold and silver are the commodities you would buy when you think that the economy is going to slow down, because these are where there are the biggest price increases during economic downturn, which means that when you purchase these commodities you are literally betting against the economy.

Author: Ricky Weber
Article Source: EzineArticles.com
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Commodity trading

Commodity trading is the trading in commodity derivatives, where commodity refers to any bulk goods traded in the exchange. Mainly Bullion, Energy, Metals and Agricultural Commodities are trading in the commodity market. Derivative is a kind of financial security whose price is depend upon or derived from one or more underlying assets. The derivative assets may be in the form of stocks and bonds of corporate, commodities and currencies of various countries. Commodity trading basically refers to trading where investors buy or sell commodities, through future transactions or contracts.

A future is a standardized forward contract that requires delivery of a commodity at a specified price on a specified or predetermined future date. In this case the buyer is obligated to fulfill the terms of the contract. The buyer and seller have the option to square up their position before expiry of the contract subject to other conditions governing each contract. Although the commodity trading pattern is quite similar to equity share trading, it involves smaller margins and is lot easier to understand. A commodity trader can start with commodities like gold and grains, which attract very low margins. As well, the time limits for commodity trding stretch from morning 10 O’clock to mid-night. Hence it is possible to trade after completing day-to-day work.

Requirements – physically & mentally

Find a broker/sub-broker to open account to trade with commodity. The broker if satisfied with the economic standing of the person, they may ask pan card, demat account, bank account and margin money for opening account with him. After completing these formalities, the person allowed for commodity trading.  Margin is the upfront money payable to broker before taking a position in the market. Like equity trading activity, the commodity trading requires the easy accessibility of information and liquidity facility. The trader can easily reduce risk by effective diversification. The low risk trading strategies include both delivery spreads and spot-futures arbitrage. The trader can take advantage of the low margins and take directional calls on the markets. The market is diverse in nature, and it is suitable for the day trader/speculator, long-term investor, hedger and arbitrageur.

Risk and Return

Higher the return there is risk also high; lower the return the risk is also low. Based on the risk-return appetite, the trader can enjoy benefit or return. Commodity trading is basically futures trading giving rise to leveraged positions. For this sake, mostly the wealthy and knowledgeable traders campaigning towards commodity trading place. Risk is inherent in any investment, by proper entry and exit strategy can safeguard from loss. The uncertainty and risk are part of all derivative markets and risk factors in commodity futures trading are similar to futures trading equity markets. The key difference is that the information availability on supply and demand fluctuations in commodity markets may not be as tough as the equity market. The return from the commodity market is also handsome, if the trading strategy of the trader worked out properly. The understanding about the technical and fundamental factors of global as well as domestic economy helps to earn superior returns from the commodity trading. Inflation is the big problem in the present economy; commodity is the good tool of investment strategy to beat inflation risk. Commodities are the hedge against inflation because unlike equity, commodity prices move in tandem with inflation. Besides, buying commodities make your investment truly global and there are no issues with company management or cash flow involved, all of which make commodity trading a pure demand and supply match.

Clearing and Settlement

Delivery based trading is now becoming popular. Each contract has a lot size and delivery size; it varied from asset to asset. Market participant are required to negotiate one the quantity and price of the contract, as all other parameters are predetermined by the exchange. Delivery is in dematerialized form and can be rematerialized at time at the request of the trader with the depository organization.

Conclusion

The markets are very lively and dynamic. A systematized and cautious moving will help to being a successful trader. Patience, discipline and knowledge are all important qualities to develop successful and fruitful commodity trading.

Commodity trading is an exciting investing opportunity that was once limited to brokers but that thanks to the internet anyone can play in. Here’s how to get started with commodity trading.

Commodity markets move primary or raw product which are traded on commodities exchanges and it’s important that you know how to get started with commodity trading so that you learn how to buy and sell commodities.

The internet has opened up the commodity market and primary products like sugar, corn, precious metals, and so much more are being traded online. Commodity marks deal with non financial instruments like bonds. Once you know how to get started with commodity trading you won’t have any problem deciphering the different categories.

Prior to online trading there were places designated for commodities exchanges. You would have to appear there or have a broker that would negotiate for the commodity you wanted. Needless to say how to get started with commodity trading was a lot more complicated.

Today finding out how to get started with commodity trading is available 24/7 on the internet with access being very easy both for learning and for buying and selling. There is no reason to have a broker anymore. The electronic age has certainly changed how we do business.

One of the biggest perks now is the transparency of the price. The top 5 bids are displayed which allows for fair trade. It also makes it easier to learn how to get started with commodity trading.

Commodity investing is an investment that can make you some nice profit. But of course they also carry some risk. Learning how to get started with commodity trading and how to trade right will give you the least amount of risk.

There are all kinds of websites that offer commodity trading online. Generally there is a fee for setting up an account. Some even have a minimum amount that you must put in your account. Most of these sights have a host of tools to help you learn how to get started with commodity trading and to help you make the best trades possible.

Commodity training online is a very lucrative business and if you really would like to move yourself into a different earnings class may we suggest you learn how to get started with commodity trading. You won’t be sorry and it won’t be long before you are making all the right moves.

Author: Joel Teo
Article Source: EzineArticles.com
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Here is a unique investing tool designed to help the average Commodity Investor make consistent profits in the Green Markets. As an average Investor you may have figured out by now that a small movement in the Commodity market can MAKE or BREAK you and that it seems the only one’s that consistently make money are the BIG PLAYERS! Players like Farmer’s who are hedging their tangible investments or Producer’s who make flour, cereal or other tangible goods that you and I eat. You may have started thinking that you need $100,000 to even begin trading the volatile markets! But, what if I could show you a little known secret that I call The Corn Flake Trade that will, when followed precisely, consistently double or triple your investment? What if I told you that there was little to no risk involved?

Now do I have your attention? I should because in the next few paragraphs you will learn where you can obtain the information that will catapult you from an average Investor to a Super Investor! In a few short months you will be looked up to by your friends and family as the guy who cracked the Commodity code! The one who has figured out how to make money, lots of money through the Internet on virtual auto-pilot!

Ever since Commodity trading started some eons ago, there have been Traders that have tried to capture price differences of a particular commodity verses the supply and demand. And, if you were an astute trader you could purchase certain commodities from one sector in the world and turn around and sell it in another sector and make tons of money or tons of whatever the accepted method of trade was at the time.

As time went on, these types of Traders became known as Future’s Traders, because they were trading into the future of particular commodities. However, as more and more Trader’s became involved not only did liquidity become very fluid but bigger and bigger Trader’s were being attracted–kind-of like being in a large fish tank and someone keeps adding in bigger and bigger fish, soon the big fish are gobbling up the little fish…and well you hope that you are not the little fish! And, in reality to stay big enough to not be gobbled up you had to increase your net worth and consequently your investment funds–because that’s all that separated the little fish from the big fish. However, there always seemed to be these little fish that would dodge the big fish feeding frenzy and they themselves would become the really big fish that were gobbling up the other big fish. How? One might say are some Investors able to do this?

“Well…”, as one Philosopher once said to another, and the other said, “That is a very deep subject, but please continue.” There are ways to keep from being gobbled up. One way is to stay out of the same waters the big fish are in, if this makes sense to you. Another way is to stay in the holes that the big fish are powerless in. That’s what I am going to tell you about…a hole that the big fish are powerless in and that will allow you to grow up and become a big fish yourself.

Mind you…it takes hard work and dedication! Just the same as if you were looking to invest in any commodity, you still need to do your homework, your charting, your fundamentals and keeping up with all the news that goes along with commodity trading. But, the big difference is you will be making trades that the big fish cannot screw around with! You know what I mean…when the Hunt Brother’s cornered the silver market…little did they know they were entering extremely deep waters that NOT even their fortunes could save them from. There are Players out there that can swallow Bill Gates so don’t even think you can out guess them, cause about the time you think you can they will switch and you’ll find yourself in the belly of a monster losing a huge part of your fortune.

You’ve heard about spreads right? There’s financial spreads and other commodity spreads. The bad thing about MOST spreads is that the commodities you are watching the spreads on never change! You might be asking yourself what? What do you mean, “Never change”? Just exactly what I am saying, MOST commodities never change. They are always the same. Like the EURO for example and the USD or the YEN they are always connected to their respective markets and they are always going to be the same EURO, USD or YEN, they are never going to be different from one part of the year to the next. Yes, there are spreads that you can make money on with these commodities, but they are about as predictable as any other commodity investing, about the time YOU think you’ve got it figured out…the big fish change the rules or some natural disaster changes it for you.

See you have to understand that the News and information that the majority of Commodity Investor’s rely upon are owned and controlled by some of the biggest fish out there…how do you think you are going to fair against someone or entity that can control what you read and hear? NOT! Right? But, what if you were investing into a spread that won’t matter what the news or what you hear about it? What if this spread is predictable every year, maybe several times per year and there’s nothing the BIG FISH can do about it? What if they just are swimming the same direction as you…but they don’t advertise this fact to the average Investor? What if I could get this information to you? How much would it be worth to you?

Here it is, the type of commodity spread that YOU need to be doing to consistently make money in the commodity market is a Wheat/Corn spread. Why? Because Wheat and Corn are unique in the fact that a 5000 bushels of Wheat in December is NOT the same as 5000 bushels of Wheat in May! Also, often times Farmer’s will switch what they feed their cows from Corn to Wheat or visa-versa depending upon the prices of each commodity. When do you do the trades? Timing is of the essence, however, Wheat and Corn almost always like clock-work become priced close to each other at least once per year, and often times more–that’s when you do this unique trade. Also, if they widen to far, you can do a reverse spread trade between these two commodities. You really should dig into this trade more. Become an expert in this area of the commodity world and you will never have to worry about money again! And, if you want to dig into this unique trading tool simply type into your Google browser the words “Corn Flake Trade”. You will find an overwhelming amount of information about this hole in the Ocean of Commodity Trading.

Author: DJ Willie
Article Source: EzineArticles.com
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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.

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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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
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Have you ever heard investors mention speculating in futures of the commodity market and wondered what it they are talking about? While most of us are familiar with investing in stocks, commodities can be an interesting way to have your money make money for you.

But first, you might ask what is a commodity? commodities are goods we are each one portion is the same as the other. For examplee, oil is a commodity because one barrel of oil is the same as the next. Wheat is also a commodity each bushel of wheat is identical to every other bushel of wheat and anyone purchasing them could care less whether they get bushel number one or bushel number two. Gold is another example of a commodity. 1 ounce of gold is the same as the next.

There are some differences in some commodities to external forces such as shipping costs or differences in composition. For example, not all oil sells for the same cost because they may come from different sources were shipping is a consideration. Also they may trade on different markets where the pricing is different.

There are two ways that commodities are traded, in spot markets, or as futures.

Spot markets, refer to trades that take place literally on the spot. The commodity is traded right then and there, usually for cash but also could be for some other product or good. For example, if you want to buy an ounce of silver, you can go right down to the jeweler give him some cash and it will give you so. This is spot trading.

Of course, spot trading can be done in larger volume as well. Some traders exchange millions of ounces of silver or thousands of barrels of oil and then sometime later the actual goods are delivered.

When traders talk about futures or options it is not the actual good that is traded for rather a contract to buy or sell that particular commodity for a particular price a certain date in the future. This is how most commodities trading is done. This type of trading can have huge profits and also huge losses as it involves speculating on the future which can be full of risk and uncertainty.

this type of trading has been around in its present form since the late 18th century . Around this time farming became more modernized which allowed commodity trading to be profitable. Although this is an age-old way of making money, the basics remain the same today as they were in the late 1700′s.

For example, wheat takes many months to grow. So at the beginning of the planning, the market price when the wheat is ready and speculated on. So if a farmer plants meet in May which will be delivered in September, the price at that time may be four dollars a bushel. If in June the price begins to fall, and the farmer feels the price will continue following, he may offer a contract on this week for the current price (lower than $4.00). Now if someone thinks that the price will go up over four dollars, then this contract will look like a pretty good deal and they may take them up on it.

Since no one knows for sure what that price will be, an actual prices based on such unpredictable things such as weather, this whole process Is called speculation. so now when September rolls around, the farmer delivers his wheat for the agreed on price. Now if the price has actually gone up to over four dollars and the speculator has made a profit. But, if in fact, it is fallen to wander the agreed-upon price he has lost money.

So there you have it, the basics of commodity trading.

Commodities as an asset class are quickly becoming popular! It is being said that the 21st century belongs to commodity trading. Just remember the early part of 2008, when crude oil prices skyrocketed from $60 per barrel to around $150 per barrel. Wheat, copper, silver, aluminum prices all hit a high during the same time. It seemed that commodity prices are going to hit an all time high.

Now, commodities are going to experience a long period of high demand and low supply. This will propel their prices to all time high. Fundamentals behind the boom in the commodity market are strong. Countries like China, India, Braxil, Russia and others are developing fast. This will increase the demand for commodities in these fast developing economies. This high demand is going to make the prices in the commodity market to skyrocket. Then there is an overall increase in the global population, people are rapidly moving to cities in the developing world, this increases the demand for commodities all over the world. Copper, aluminum and other commodities will be in high demand. In other words, these strong fundamentals will continue for many decades in the 21st century. You need to ride this boom that is taking place in the commodity market.

Now commodity investing can be done in many ways. This is unlike stocks. There are many different investment vehicles that you can use to invest in commodities. You can invest in companies that process commodities like copper, aluminum, uranium. You can even invest in energy companies and oil and natural gas companies. You can invest in commodity ETFs. You can buy precious metals ownership certificates. You can invest in Master Limited Partnerships. Last but not the least, you can invest in gold and oil futures. There are so many possibilities that you can use to invest in commodities.

Master Limited Partnerships (MLPs) that invest in energy infrastructure like pipelines and storage facilities are a unique investment as they are traded publicly like a corporation but they offer the benefits of a partnership. Unlike Corporation that are taxed two times, MLPs are not taxed and they pass on their income to shareholders tax free. You will be only taxed on individual basis if you invest in an MLP. An MLP’s primary responsibility is to pass on all the cash flow directly to shareholders, you can afford not to invest in MLPs.

With the rise in the crude oil prices, the demand for nuclear power is on the rise. Price of uranium has gone from $10 in 1994 to more than $40. Uranium market is in an extended bull market for the last decade. You can profit from investing in companies that mine uranium ore.

As more and more investors and traders flock towards commodity trading, exchanges that provide futures contracts, options and other derivatives to commodity traders have seen their stock prices rise! The Chicago Mercantile Exchange (CME), one of the largest commodity exchanges has seen its stock price rise from $40 in 2003 IPO to almost $500 in 2006. This performance was even better than GOOGLE. With the global economy out of recession, this price is again going to shoot up. This is the best time to start commodity trading!

Author: Ahmad A Hassam
Article Source: EzineArticles.com
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The economic downturn has many people worried about recession, and inflation rates seem to be rising every other week. In light of such uncertain times, have you ever wondered if investing your hard earned dollars into the stock market is the prudent thing to do? Or are you already considering alternative forms of investment? If so, consider online commodity trading, because depending on your knowledge, risk appetite, and the commodities you choose, you have the potential to earn big returns on your investment.

But if you’re a greenhorn at the commodity market, or even at trading for that matter, you might be wondering what commodities trading is all about. Commodities trading is where traders trade contracts for goods, and not for the goods themselves; goods such as food like corn or malt, or metals like gold and silver. The traders don’t have to deliver the goods to some end-consumer at the end of the day, because they don’t have the goods to begin with, and most likely never will have them. A trader would instead buy a contract if he thought that the price for a commodity would be going up in the future. He would then sell the contract if he thought the price would depreciate. Think of it as a kind of insurance plan for the traders and investors; regardless of price fluctuations, both the buyer and the seller are guaranteed the price stated in the contract at the time of trade. Just like any business transaction, there is always a buyer and seller in every trade made, but neither the buyer or the seller is required to own a particular commodity in order for the trade to happen. The only thing that a trader has to do is to deposit enough capital with a brokerage firm to ensure that he would be able to pay for his losses if his trade loses money. This is known as commodity futures trading.

So now that the concept of commodities trading is out of the way, why trade online?

Online commodities trading involves the transmission of orders by customers to either buy or sell a commodity to a commodity exchange via an electronic marketplace. Unlike the traditional offline method of trading, no brokers are required to represent customers. However, having an online broker would cost you less commissions-wise than if you were to have a full-service broker. As such, you stand to be more profitable on your trades than if you were to trade offline.

Trading commodities online also provides you with almost everything you need the moment you log into your trading account. Most online brokers are equipped with real time information, ranging from futures news, price quotes, charts, technical analysis programs, and other research material that are made available for their clients. As such, those who wish to embark on online trading on their own are able to make more informed decisions when trading because the same tools have been made available for them online.

However, despite the apparent advantages of trading commodities online, one would also have to be aware of the pitfalls that are associated with online commodities trading.

For one thing, because you have the freedom to make your own trades online, there is no one watching over your shoulder to guide you along with your trades. Inexperienced traders usually lose money this way, because they think that the tools made available to them through trading online make great substitutes for experience. The fact is that nothing can substitute experience, and having an experienced broker by your side would most likely help you avoid such losses. Treat the broker as a mentor if you’re just starting out; learn by asking questions and having them answered within minutes instead of spending hours or days researching on your own.

Another issue to take note of is over trading. The temptation to be swayed from one’s original plan of holding trades for a period of time rather than ‘capitalizing’ on small breaks in the market trend are usually the cause of traders losing a sum of money, most often the considerable portion of it is by way of commissions. Even though commissions on every trade may be cheap, every commission compounds to every trade made; worse still if the trade results in a loss. So while it might be a good idea to seize a good opportunity when you see one, make sure you have a plan tailored for every trade you intend on making, instead of changing your strategies blindly just because you’re lured by the possibility of making a quick buck.

While online commodities trading may seem like a prudent investment option in these uncertain times, it requires discipline, the right mindset, and a sound trading plan in order for you to succeed in it. For beginners, the best way to trade commodities is through an online broker.

Author: Marcus Walker
Article Source: EzineArticles.com
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Online commodity trading newsletters provide information about all areas related to the trade. They are one of the best options open to investors to understand and analyze the ever-changing scenario of the commodity market. The purpose of these newsletters is to present ideas and articles about trading. The newsletters contain articles about the market indicators, trading system design, money management methods, and technical tools for trading. For receiving newsletters on commodity trading online, an individual has to provide his name and email address to the company from whom he wishes to order. In some cases, no subscription fee is required to be paid.

Companies offering online commodity trading newsletters observe pricing relationships in the international market including intra-commodity spreads (calendar spreads), inter-commodity spreads (spreads between correlated commodities), geographical price relationships, etc. They also provide analysis of the behavior of a price series during a given time gap. Some of these newsletters concentrate on different aspects of the commodity market on different days of the week. Price fluctuations, which are an everyday feature of the commodity market, can be well understood with the help of newsletters. The newsletters spot trading and hedging opportunities by alternately applying fundamental and technical strategies. They assimilate a vast array of information about the market and present it in a concise format. These newsletters cater to all types of investors from speculators to end-users.

Commodity trading newsletters are mainly designed to provide clients the benefits of a reliable range of reports that contain a plan of action on how to approach each trading day. They provide an analysis, which illustrates key supply-and-demand factors that drive commodity prices and also present long-range price forecasts. The information is available in an easy to read format so that even beginners know how to go about trading in the commodity market. Newsletters also provide various buy and sell recommendations. Hence, online commodity trading newsletters are a guide for investors who trade in the market by helping them decide which investments are profitable and which are risky.

Author: Jason Gluckman
Article Source: EzineArticles.com
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