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Basics of Commodity Trading

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Basics of Commodity Trading

To trade commodities successfully traders ought to start by learning the basics of commodity trading. Trading commodities is really commodities futures trading. Producers and processors of commodities buy and sell futures contracts for delivery on a specific date during any of the next months or years. Producers and processors are typically hedging their investment risk and helping to provide a stable market for the commodity in question. Speculators can trade the samecommodity futures contracts by buying and selling futures or they can buy options and sell options on futures contracts. Commodity and futures training is a good place to start learning the basics of commodity trading. For those interested options trading in commodities markets, Options Training with Stephen Bigalow will provide basic knowledge as well as the deeper insight gained from experience trading options in commodity futures.

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Basics of Commodity Trading

  1. 1. Basics of Commodity Trading By www.CandlestickForums.com
  2. 2. To trade commoditiessuccessfully traders ought tostart by learning the basics of commodity trading. Trading commodities is reallycommodities futures trading. www.CandlestickForums.com
  3. 3. Producers and processors ofcommodities buy and sell futures contracts for delivery on a specific date during any of the next months or years. www.CandlestickForums.com
  4. 4. Producers and processors are typically hedging theirinvestment risk and helping toprovide a stable market for the commodity in question. www.CandlestickForums.com
  5. 5. Speculators can trade the samecommodity futurescontracts by buying and sellingfutures or they can buy options and sell options on futures contracts. www.CandlestickForums.com
  6. 6. Commodity and futurestraining is a good place tostart learning the basics of commodity trading. www.CandlestickForums.com
  7. 7. For those interested options trading incommodities markets, www.CandlestickForums.com
  8. 8. Options Training with Stephen Bigalow will provide basicknowledge as well as the deeper insight gained from experience trading options in commodity futures. www.CandlestickForums.com
  9. 9. Commodity futures as an asset class differfrom stocks or long term bonds. www.CandlestickForums.com
  10. 10. A standard futures contractfor corn futures, oil futures, or gold futures is a claim or a promise relating to a standardized quantity of a tangible asset. www.CandlestickForums.com
  11. 11. The claim for delivery orpromise to deliver is on the contract expiration date. www.CandlestickForums.com
  12. 12. As a matter of fact, traders seldom hold a contract through to expiration but rather execute the opposite trade on the samecommodity and expiration date in order to exit the trade. www.CandlestickForums.com
  13. 13. Because a futures contract has an expiration date it is not a claim upon the assets of a corporation. www.CandlestickForums.com
  14. 14. Supply and demand oftencause pronounced commodity priceshifts. www.CandlestickForums.com
  15. 15. Agricultural commodities areespecially prone to large fluctuations in price as variation in weather conditions and amounts of crops planted or cattle culled from herds affect supply. www.CandlestickForums.com
  16. 16. The basics of commodity trading are that a trader in commodities is not concerned with competence of management, a margin of safety, ordiversifying a stock portfolio into various market sectors. www.CandlestickForums.com
  17. 17. He or she is concerned with drought in Argentina or Russia, the opening ofmarkets in Asia, or, in the case of gold,the seemingly continual devaluation of the US dollar. www.CandlestickForums.com
  18. 18. The basics of commodity trading are that some commodities canbe stored, like gold, oil, and corn. www.CandlestickForums.com
  19. 19. Some commodities, such asmilk, have a short shelf life. www.CandlestickForums.com
  20. 20. Knowing the basics ofcommodity trading for a givenset of commodities is essential for trading them. www.CandlestickForums.com
  21. 21. Traders should know that thedecisions of large producers andbuyers of commodities typically drive the markets in various commodities. www.CandlestickForums.com
  22. 22. Therefore, not all fluctuation incommodity prices is based uponthe fundamentals of production and demand. www.CandlestickForums.com
  23. 23. It is also based on anticipation of market factors by large buyers and sellers. www.CandlestickForums.com
  24. 24. Thus, successful commodities trading requires the ability to anticipate the actions of othertraders, the commodities market. www.CandlestickForums.com
  25. 25. Using technical analysis tools such as Candlestick chartpatterns helps the trader see where the market is going. www.CandlestickForums.com
  26. 26. This is because trading patterns in commodity prices tend to repeat themselves. www.CandlestickForums.com
  27. 27. Knowing the basic Candlestickanalysis patterns helps the smarttrader with useful knowledge to successfully trade and profit from trading commodities. www.CandlestickForums.com

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