Learn Commodity Trading
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Transcript of Learn Commodity Trading
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.By: www.CandleStickForums.com
To learn commodity trading you will want to understand why traders trade and how
they do it.
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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.
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Learning fundamental analysis and technical
analysis of the commodities market are both essential for
successful trading.
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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.
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A traded commodity is something that varies in price over time. Otherwise there is
no point in trading it.
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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.
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Commodity trading is in commodity futures. There are
two basic types of traders. Many commodity producers trade in order to hedge their
risk.
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Agricultural cooperatives, mining operations, and large food processing corporations
commonly buy and sell commodity futures.
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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.
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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.
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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.
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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.
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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.
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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.
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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.By: www.CandleStickForums.com
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.By: www.CandleStickForums.com