Introduction to Commodity Futures Trading

The following article includes pertinent information that may cause you to reconsider what you thought you understood. The most important thing is to study with an open mind and be willing to revise your understanding if necessary.

More information about the stock market by reading this article. Knowledge is important when it comes to trade futures.


What are commodities?

The words "property" and "future" are often used to describe trading or futures trading. You can think of them as generic terms to describe the markets. This corresponds to how "people" and "actions" that are used when investors are on the exchange. To be more precise, what they really mean: Commodities are the actual physical goods like corn, soybeans, gold, oil, etc. are contracts traded commodity futures exchange in the future, as the Chicago Board of Trade (CBOT). Futures contracts has grown more than just commodities, futures contracts are now in financial markets than the S & P 500, T-notes, coins and many others.


Futures Contract: December 2007 corn, the 2007 is a contract of 5000 bushels of corn, December, traded on the Chicago Board of Trade with a contract that expires in.

  • A hypothetical price of that contract may be $ 3.60 per bushel.
  • How futures work?

    Hopefully the information presented so far has been applicable. You might also want to consider the following:

    Futures are standardized contracts between buyers and sellers of goods, indicating the quantity of a product, grade / quality and location of delivery. Were trading in futures contracts in a futures market instead, and how the stock market completely anonymous.

    For example, the buyer could be an end user, such as Kellogg's. You have to buy corn to make corn. The seller is likely that a farmer has to sell his corn crop. Create a contract in December corn futures at the current market price. A contract for corn at the CBOT is composed of 5,000 hectares. Why farmers to 5000 tonnes of maize from Kellogg's have delivered in December in a particular place.

    To raise money in the future

    A speculator is a person who invests in a company with the goal of making profit. For commodity traders speculators who buy low and sell them in the future are still trying to make money. The reason is that speculators can do that is with the future, that dealers are not required to hold futures contracts for the contract, sell it, or may at any time.For example, Kellogg's past use, a speculator, the Treaty of grain farmers a certain price, buy, then wait for the price of corn before selling the contract products rise to Kellogg's, although generating the contract is not within a few months a profit in the process.

    Actors involved in commodity trading

    There are three types of actors in the commodity markets:

    1. Advertising: The units of product in the production, processing and marketing of a product. For example, corn farmers and the Kellogg's ad example above. Advertising for the majority of trading in the commodity markets.
    2. Large speculators: A group of investors who pool their money together to reduce profits and increase risks. As an investment fund in the stock market speculators have a lot of money managers, investment decisions by investors as a whole.
    3. The small speculators, traders person acting on his own goods or a commodity broker. Both large and small speculators are known for their ability to shake the known commodity market.

    How to start trade products

    To trade goods should be brought up in the futures contract specifications of each product and of course you learn trading strategies. Commodities have the same reasons as any other investment – you want to buy low and sell high. The difference in raw materials is that they are deeply in debt and in order sizes rather than shares. Remember that you purchase and short positions when the markets are open, so be sure you do not need to take to the delivery of a truckload of soybeans.

    We hope you enjoy this article on the trading of futures and got involved understand the market for commodity futures trading.

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    Take time to consider the points presented above. What you learn may help you overcome your hesitation to take action.

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