23:09
Faizan
Commodities are basically raw materials that make up business the goods we manufacture, transport or consume.
A commodity market is one which facilitates trading in various commodities. This market has had tremendous economic impact on nations and people, both historically and currently. Shortages on critical commodities have sparked wars throughout history (not to forget when Japan ventured into foreign lands to secure oil and rubber we faced World War II), while oversupply can have a devastating impact on a region by devaluing the prices of core commodities.
The four categories of trading commodities include:
Energy ( such as crude oil, heating oil, natural gas and gasoline)
Metals (such as gold, silver, platinum and copper)
Livestock and Meat (such as lean hogs, pork bellies, live cattle and feeder cattle)
Agricultural (such as corn, soybeans, wheat, rice, cocoa, coffee, cotton and sugar)
There are about 30 actively traded commodities that one can choose from the U.S. futures exchanges. Naturally, the new commodity traders wonder about the top notch options when it comes to choosing commodities for trade.
To put it very simply, the factors to consider when choosing the best commodities to trade are market liquidity as well as fundamental trends.
However, for starters, it is best to stick to commodities where one already possesses some basic industry knowledge. Consciously or not, all of us have some reasonable knowledge of at least one commodity through some type of work experience. For instance, people in the candy or sweets business watch the price of sugar closely, whereas, jewelers monitor the prices of precious metals on a daily basis and they know what is hot and trending.
With some basic knowledge, one may move on to select trading of commodities that fall within one's risk parameters. It is important to realize that not all commodities have equal risk. That is why some fundamental 'trend-trading' is required to do the risk analysis.
A commodity market may be a spot or a derivatives market. In spot market, commodities are bought and sold for immediate delivery, whereas in derivatives market, various financial instruments based on commodities are traded. These financial instruments called 'futures' are traded in exchanges. To find out the volatility of each commodity, one should check the futures margin of each commodity. The margin on a futures contract depends on the amount of risk with each commodity (the daily price swings of futures contracts), so make sure the amount of risk is suitable for you when you pick a commodity to trade. In order to do that, both fundamental and technical trending analysis techniques are required. For example, a trader who is expecting a long term rise in prices of corn futures will still want use tools such as Candlestick pattern formations to watch daily futures price movement in order to get the best purchase price even though he or she may be holding futures contracts for months or years. For the new comer in commodity trading, the best commodities to trade may be those with less market volatility and, therefore, less risk of substantial loss.
A commodity market is one which facilitates trading in various commodities. This market has had tremendous economic impact on nations and people, both historically and currently. Shortages on critical commodities have sparked wars throughout history (not to forget when Japan ventured into foreign lands to secure oil and rubber we faced World War II), while oversupply can have a devastating impact on a region by devaluing the prices of core commodities.
The four categories of trading commodities include:
Energy ( such as crude oil, heating oil, natural gas and gasoline)
Metals (such as gold, silver, platinum and copper)
Livestock and Meat (such as lean hogs, pork bellies, live cattle and feeder cattle)
Agricultural (such as corn, soybeans, wheat, rice, cocoa, coffee, cotton and sugar)
There are about 30 actively traded commodities that one can choose from the U.S. futures exchanges. Naturally, the new commodity traders wonder about the top notch options when it comes to choosing commodities for trade.
To put it very simply, the factors to consider when choosing the best commodities to trade are market liquidity as well as fundamental trends.
However, for starters, it is best to stick to commodities where one already possesses some basic industry knowledge. Consciously or not, all of us have some reasonable knowledge of at least one commodity through some type of work experience. For instance, people in the candy or sweets business watch the price of sugar closely, whereas, jewelers monitor the prices of precious metals on a daily basis and they know what is hot and trending.
With some basic knowledge, one may move on to select trading of commodities that fall within one's risk parameters. It is important to realize that not all commodities have equal risk. That is why some fundamental 'trend-trading' is required to do the risk analysis.
A commodity market may be a spot or a derivatives market. In spot market, commodities are bought and sold for immediate delivery, whereas in derivatives market, various financial instruments based on commodities are traded. These financial instruments called 'futures' are traded in exchanges. To find out the volatility of each commodity, one should check the futures margin of each commodity. The margin on a futures contract depends on the amount of risk with each commodity (the daily price swings of futures contracts), so make sure the amount of risk is suitable for you when you pick a commodity to trade. In order to do that, both fundamental and technical trending analysis techniques are required. For example, a trader who is expecting a long term rise in prices of corn futures will still want use tools such as Candlestick pattern formations to watch daily futures price movement in order to get the best purchase price even though he or she may be holding futures contracts for months or years. For the new comer in commodity trading, the best commodities to trade may be those with less market volatility and, therefore, less risk of substantial loss.
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