Buy Commodity Futures


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Buy Commodity Futures

Traders buy commodity futures in the expectation that the spot price on the commodity contract settlement date will be higher than the contract price.
The trader will rarely accept delivery when they buy commodity futures.

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Buy Commodity Futures

  1. 1. Buy Commodity Futures By
  2. 2. Traders buy commodityfutures in the expectation that the spot price on the commodity contractsettlement date will be higher than the contract price.
  3. 3. The trader will rarely accept delivery when they buy commodity futures.
  4. 4. They will sell an equalquantity of the commodity, thus exiting the contract.
  5. 5. The only ones who will actually deliver or takedelivery of commodities are the producers and their customers.
  6. 6. These traders are hedgingwhen they buy commodity futures or sell them.
  7. 7. For example gold miningcompany may sell gold futures and an oil refiner may buy oil futures in order to lock in acompetitive price for the next months or years.
  8. 8. It is possible to buycommodity futures on oil andother energy products several years into the future.
  9. 9. Trading commodities requires a basic knowledge of the commodity in question and ongoing fundamental and technical analysis in order to competently anticipate commodity price trends.
  10. 10. To learn how to buycommodity futures engaging in Commodity and Futures Training is wise.
  11. 11. The use of very visual technical analysis tools such as Candlestick chart analysiscan lead to profitable trades in the commodities markets.
  12. 12. Hedging commodities by producers and their customers goes back to the beginning of Candlestick basics in ancientJapan when rice traders learnedto let the market tell them what the market would do.
  13. 13. The traders who developedCandlestick charting learnedthat market history repeats itself.
  14. 14. This repetition of Candlestickpattern formations allows traders today to buy commodity futures with an accurate sense of wherethe market is going next and how to engage in profitable commodity trading.
  15. 15. When producers and customers hedge they areguaranteeing themselves a set price at a future date.
  16. 16. This is a form of insurance and means of managing investment risk.
  17. 17. The constant buying andselling of commodity futures by the main players in the commodities marketsprovides a baseline liquidity and stability to commodity trading.
  18. 18. The addition of traders speculating on market activity adds to market volume andliquidity making technical analysis more accurate and typically makes Candlestick trading tactics even more successful.
  19. 19. Those who buy commodityfutures are buying contracts for large quantities of livecattle, gold bullion, crude oil, and other commodities.
  20. 20. However, the commodity market offers the trader leverage so that he or she need not provide the moneyto pay for the entire contract.
  21. 21. To buy commodity futures the trader will typically payseveral percent of the contract price.
  22. 22. The leverage in buyingcommodities can lead to substantial returns on investment.
  23. 23. The leverage can also lead to losses exceeding initial investment.
  24. 24. Because of the potential market volatility in tradingcommodities the trader is well advised to stay in close touch with his or her investment.
  25. 25. When a trader decides to buycommodity futures the trader is not obliged to keep the contract until the settlement date.
  26. 26. If Candlestick analysis predictsthat commodity futures prices will move in a profitable direction the trader can beready to sell an equal contract and exit his or her position with a profit.
  27. 27. If, as can happen, a technicalanalysis tool such as Candlestick chart formations predicts an unprofitable market move the trader will be able to exit the position before experiencing substantial losses.