Hedging commodities


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There are records of traders hedging commodities as early as 17th century Holland and Japan (Tulips and Rice). It was in 1848 that the Chicago Board of Trade was founded. Centrally located for United States agriculture the commodities exchange became the most important in the world for hedging commodities. The necessity for trading commodity futures comes from the uncertainties of crop and livestock production. A drought with a subsequent bad harvest or loss of livestock can be devastating for farmers and ranchers. Thus many large operations and, especially, cooperatives have engaged in hedging commodities for many years. Commodity and futures training will show beginning commodities traders how profits are made from trading commodities.
Commodities trading began with producers and their buyers coming together to create a stable market for agricultural products. Today commodity futures are still largely the province of those actively involved in agriculture. However, trading in commodities is not limited to growers and processors of agricultural products. Many who are trading commodities online are able to profit from the movements in the grain and meat markets without ever planting a row of corn or butchering a steer. Candlestick basics have worked in Japanese rice trading for centuries and Candlestick chart analysis is useful today in trading everything from rice to gold to environmental credits.

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Hedging commodities

  1. 1. Hedging CommoditiesBy: www.CandleStickForums.com
  2. 2. There are records of traders hedgingcommodities as early as 17th centuryHolland and Japan (Tulips and Rice).It was in 1848 that the Chicago Boardof Trade was founded. Centrallylocated for United States agriculturethe commodities exchange became themost important in the world forhedging commodities.By: www.CandleStickForums.com
  3. 3. The necessity fortrading commodity futures comesfrom the uncertainties of crop andlivestock production. A droughtwith a subsequent bad harvest orloss of livestock can be devastatingfor farmers and ranchers.By: www.CandleStickForums.com
  4. 4. Thus many large operations and,especially, cooperatives haveengaged in hedging commoditiesfor many years. Commodity andfutures training will showbeginning commoditiestraders how profits are madefrom trading commodities.By: www.CandleStickForums.com
  5. 5. Commodities trading began withproducers and their buyers comingtogether to create a stable marketfor agricultural products.Today commodity futures are stilllargely the province of thoseactively involved in agriculture.By: www.CandleStickForums.com
  6. 6. However, trading in commoditiesis not limited to growers andprocessors of agricultural products.Many who are tradingcommodities online are able toprofit from the movements in thegrain and meat markets withoutever planting a row of corn orbutchering a steer.By: www.CandleStickForums.com
  7. 7. Candlestick basics have worked inJapanese rice trading for centuriesand Candlestick chart analysis isuseful today in trading everythingfrom rice to gold to environmentalcredits.By: www.CandleStickForums.com
  8. 8. Hedging commodities such ascotton, corn, or soybeans protectsthe producer against loss fromfalling prices and protects buyersfrom a rise in price. The producerwill sell futures in his or her cropand the buyer will buy futures.By: www.CandleStickForums.com
  9. 9. Both are protected againstsubstantial loss in case of a majormove in the market. However,neither trader needs to hold his orher position through untilexpiration.By: www.CandleStickForums.com
  10. 10. If the market takes anadvantageous turn the farmer canbuy back his futures for a profitjust as the eventual buyer can sellfutures to offset his position. Inthis case both go back to havingnormal market risk at the point ofsale at harvest.By: www.CandleStickForums.com
  11. 11. In deciding whether to buy or sellcommodities traders relyupon technicalanalysis deriving technicalindicators from tools suchas Candlestick pattern formations.By: www.CandleStickForums.com
  12. 12. Hedging commodities is no longerlimited to agricultural products.There are commodities markets inminerals such as gold and silverand commodity investing in nontangibles such as environmentalcredits and interest rate futures.By: www.CandleStickForums.com
  13. 13. To become a successful commoditytrader start by learning thebasics of Commodity and FuturesTrading, move on to simulationtrading, then fundamentalanalysis of the market in question,and finally beginning commodityfutures trading.By: www.CandleStickForums.com
  14. 14. Hedging commodities is anecessity for producers andcommodity processors. Hedgingcommodities is an opportunity forthe trader. Technical analysis withCandlesticks has worked fortraders for centuries and workstoday.By: www.CandleStickForums.com
  15. 15. These technical analysis tools allowyou to let the market tell you whatthe market will do. As weatherconditions in Brazil changes so willthe commodity market in USsoybeans.By: www.CandleStickForums.com
  16. 16. When the dollar goes up or downgold will typically move in theother direction. Knowingfundamentals is importantbut keeping abreast of marketmoves and predicting the nextmove with Candlestick trading canimprove your results.By: www.CandleStickForums.com