Basics of Commodity Trading

Basics of Commodity Trading

By
www.CandlestickForums.com

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.


Commodity futures as
an asset class differ
from stocks or long term
bonds.


A standard futures contract
for corn futures, oil futures, or
gold futures is a claim or a
promise relating to a
standardized quantity of a
tangible asset.


The claim for delivery or
promise to deliver is on
the contract expiration
date.


As a matter of fact, traders seldom
hold a contract through to
expiration but rather execute the
opposite trade on the same
commodity and expiration date in
order to exit the trade.


Because a futures contract has
an expiration date it is not a
claim upon the assets of a
corporation.


Supply and demand often
cause pronounced commodity
priceshifts.


Agricultural commodities are
especially prone to large fluctuations
in price as variation in weather
conditions and amounts of crops
planted or cattle culled from herds
affect supply.


The basics of commodity trading are
that a trader in commodities is not
concerned with competence of
management, a margin of safety, or
diversifying a stock portfolio into various
market sectors.


He or she is concerned with drought in
Argentina or Russia, the opening of
markets in Asia, or, in the case of gold,
the seemingly continual devaluation of
the US dollar.


The basics of commodity trading
are that some commodities can
be stored, like gold, oil, and corn.


Some commodities, such as
milk, have a short shelf life.


Knowing the basics of
commodity trading for a given
set of commodities is essential
for trading them.


Traders should know that the
decisions of large producers and
buyers of commodities typically
drive the markets in various
commodities.


Therefore, not all fluctuation in
commodity prices is based upon
the fundamentals of production
and demand.


It is also based on anticipation
of market factors by large
buyers and sellers.


Thus, successful commodities
trading requires the ability to
anticipate the actions of other
traders, the commodities market.


Using technical analysis tools
such as Candlestick chart
patterns helps the trader see
where the market is going.


This is because trading patterns
in commodity prices tend to
repeat themselves.


Knowing the basic Candlestick
analysis patterns helps the smart
trader with useful knowledge to
successfully trade and profit
from trading commodities.


Basics of Commodity Trading

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