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Buying Commodities


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Buying Commodities

If you are interested in buying commodities there are a number of things to do before opening an online trading account.
The obvious ones are to research online trading software and take an online trading course such as Commodity and Futures Training.

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Buying Commodities

  1. 1. Buying Commodities By
  2. 2. If you are interested in buying commodities there are anumber of things to do before opening an online trading account.
  3. 3. The obvious ones are to research online tradingsoftware and take an online trading course such as Commodity and Futures Training.
  4. 4. Aspiring traders will also want to have a fast internet connection and computerhardware with the capacity tohandle lots of data in a hurry.
  5. 5. A Windows 2003 server is typically sufficient.
  6. 6. As a general rule of thumb the trader will want at least 4 GBof memory and a dual core 3.2 GHz processor or two Quad- core 2.6 GHz processors.
  7. 7. Then the system will need two network cards, one pointed towards the system and the other pointed towards the exchange.
  8. 8. A hard drive with 30GB ormore memory capacity will beneeded to store the software and log files.
  9. 9. Once the trader has thehardware set up, the software installed, and has taken the first online class the work starts.
  10. 10. To engage in successful onlinecommodity trading the trader needs to develop a trading strategy for buying commodities.
  11. 11. A commodity is a thing that isbought, sold, and, commonly, consumed.
  12. 12. Buying commodities like cornfutures and oil futures is done for two reasons.
  13. 13. Producers and processors ofthese commodities engage in hedging in the commodities markets in order to reduce investment risk.
  14. 14. Other traders buying commodities and sellingcommodities do so in order to profit from recurrentcommodity price fluctuations.
  15. 15. Gold futures are different inthat industrial use is a small aspect of the value of this precious metal.
  16. 16. Gold prices fluctuate with the state of the economy and concerns about inflation.
  17. 17. However, when buyingcommodities the trader is concerned about price.
  18. 18. . How the commodity is usedis only important so far as that information affects commodity supply and demand.
  19. 19. Buying commodities is profitable in so far as thetrader is able to anticipaterises in commodity prices.
  20. 20. The trader will buy futures onthe commodity and then sell once the price has risen.
  21. 21. If the price is likely to head down then the commodity trader will want to sell commodities instead ofbuying and then buy when the price has gone down.
  22. 22. The point of this discussion is that a commodities trader needs tolearn the fundamental analysis of the commodity he trades andneeds to use his trading softwareto do continual technical analysis in order to profit.
  23. 23. Developing a commodity trading system is of utmost importance which is why aformal start to learning about buying commodities is important.
  24. 24. An alternative to buyingcommodities is buying calls or buying puts on futures contracts.
  25. 25. Unlike buying commodities, buying options does notconfer an obligation to buy the commodity.
  26. 26. The trader buys the right to either buy or sell thecommodity future in question.
  27. 27. He or she need only exercise the options contract if the price moves in the right direction.
  28. 28. Although the options trader pays a premium for buying options he does not lose money based uponunexpected price movement when buying commodities.