Learn Commodity Trading

Learn Commodity Trading
By: www.CandleStickForums.com

To learn commodity trading,
consider Commodity and Futures
Training. In Commodity and
Futures Training you will learn the
types of commodities that can be
traded, how futures contracts are
set up, and how prices for futures
are arrived at.

To learn commodity trading you
will want to understand why
traders trade and how they do it.

The point of trading commodities
futures or futures options is to
make money but that means
effective handling of investment
risk as well as scouting out
commodity trading opportunities.

Learning fundamental analysis and
technical analysis of the
commodities market are both
essential for successful trading.

Both agricultural and industrial
commodities are traded in their
unprocessed state. Wheat is traded
but not bread or flour. Gold bullion
is traded but not rings and
bracelets.

A traded commodity is something
that varies in price over time.
Otherwise there is no point in
trading it.

Although trading of commodities
takes place at the Chicago Board of
Trade and the New York
Mercantile Exchange traders can
access these markets trading
online.

Commodity trading is in
commodity futures. There are two
basic types of traders. Many
commodity producers trade in
order to hedge their risk.

Agricultural cooperatives, mining
operations, and large food
processing corporations commonly
buy and sell commodity futures.

For example, a gold mining
company may contract to sell half
of its expected production of gold
bullion at $1,000 an ounce next
year even though the current spot
price is closer to $1,100 an ounce.

This guarantees that, should the
gold market collapse, the company
will still have a profit on part of its
production. Traders who are not
hedging on commodities are
speculating on commodity prices.

The addition of those who simply
trade the commodities markets but
are not buyers or producers of
commodities adds liquidity to the
markets by increasing trading
volume.

There are two ways to go when you
begin to learn commodity trading.
The first is to buy and sell futures
and the second is to learn
commodity trading as options
trading in commodity futures.

Futures trading is promising to buy
or to sell wheat, live cattle, or gold
bullion on the contract expiration
date. The alternative to buying and
selling futures is buying calls,
selling calls, buying puts, or selling
puts on futures contracts.

As in all options trading buyers of
options contracts purchase the
right to buy or sell but not the
obligation. You may want to learn
commodity trading but you
probably do not want to take
delivery of a few tons of refined
metal or a herd of cattle.

Don’t worry. First of all no one will
come to your house and dump
refined copper on your lawn.
However, if you do not exit your
contract before expiration you will
receive notice of where to deliver
or where to pick up your
commodity.

You will also need to pay or deliver
the commodity.
Fortunately, options exchange will
notify all holders of contracts on
the day before expiration that
there is one day left. The vast
majority of traders exit their
contracts at that time.

Learn Commodity Trading

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