Commodity Futures Trading An Overview
Futures trading are the trading of future contracts. Commodity future contracts are contracts made to trade the underlying commodities somewhere in the future at a fixed rate, usually in the present day rate. Like stock trading, futures are traded in specific centralized trading markets like S&P and Globex.
Recently, there is a huge increase in the number of traders trading futures contracts. This can be of many reasons as 1) the simplicity of trading enabling virtually any one to trade, 2) high liquidity present in the market due to the huge volumes of trades done very day, 3) the stability of the market compared to others, 4) easy to own underlying commodity can buy a high priced product at lower prices at the time of contract, 5) low commission rates compared to trading underlying futures stocks, 6) the ability to trade from home with reduced working capital, 7) lower initial investment needed, 
the availability of mini futures requiring less account minimums and having narrow spreads, and 9) the presence of a variety of underlying products present on market.
There are mainly two types of futures trading contracts available in a futures market as those require a physical delivery and those require a cash settlement. The contracts which require a physical delivery are known as commodity futures and include futures for agricultural commodities like rice, wheat, sugar, oats; energy commodities like natural gas, crude oil, heating oil and others such as animals, wood etc. Futures contract which require a cash settlement are known as financial futures and involve treasury notes, bonds, mutual funds etc.
The buying of futures, in the commodity futures market, is known as going long and selling the futures is known as going short. According to the trading style followed, online futures traders can be broadly classified in to two as hedgers and speculators. Hedgers are traders who trade for price certainty. Usually they are the issuer of futures contracts, who do so to tackle the potential loss at the actual trading time of the underlying commodity. Speculators are the actual traders buying, holding and selling these contracts for profit. Speculators include all types of traders; arbitragers, day traders, swing traders and position traders.
Every Futures trading require a futures trading broker or futures commission merchant (FCM). A futures trading broker is an intermediate between the public trader and the futures market, who deposit a margin from the web trader to the futures trading market to make the trader a recognized one. There are two types of futures trading brokers, full-service brokers and discount brokers.
A futures trading broker is responsible for maintaining the records such as each customers margin deposits, open futures, money balances, transaction completed etc. For providing these services futures trading brokers charge a commission fee, which varies which brokers. All these process are regularly monitored by Commodity Futures Trading Commission (CFTC), the federal agency protecting against manipulation, abuse, fraud and scams in futures commodity trading.
Author: Praveen Ortec
Article Source: EzineArticles.com
The Art of Professional Trading
Mark McRae, interviewed by the trader David Jenyns outlines how he thinks a beginner should start his professional trading career.
Mark: My first market was a Forex market, and I was specifically taught how to trade a five-minute chart. And I think that was totally wrong. Now, and also with indicators — and I think that, number one, I don’t think anybody should trade very small time frames, unless they are very experienced, or they are that way inclined, because if you trade — and I am thinking of myself now, and I am thinking of virtually every single person I know of who has sat down at a screen — the Forex market during the week is 24 hours, so you can sit there as a five-minute trader and be there 24 hours.
And almost — it becomes ridiculous — you can be there for 24 hours solid, or just roll it over, — you begin to see things in a five-minute chart that aren’t actually there, because you’re so close to the market. And also because you are on the hard-right edge, you have to be able to step away from it. So my advice for beginners is to start with much larger time frames — daily charts, weekly charts. I don’t think monthly charts are practical, but nothing lower than a four-hour chart, because it gives you time. Read more
Option Trading Tactics – Four Tips That You Could Apply in Option Trading
Generally, options trading are considered risky; it is still known as safer method and lucrative than other trades. A great thing about such is that, it enables immense kinds of techniques in order to differentiate the entire profiles that are at risk. Though fees of the brokers for option trade are considerably soaring than those that are in the other kind of trade, this thing could be simply offset by a great productivity that is accessible.
The only main reason why this kind of trading fascinated the standing of being always at risk is that, there are lots of traders who were driven by plain insatiability and try to attain great returns in just a very minimal time. Actually, getting big profits are probable; take some of these simple tips so you could get what this kind of trading really means. Read more
When Stock Paper Trading is of Great Use
If you are a novice in investing in the stock-markets, the best way to hone your skills would be to undertake some stock-paper trading. This is essentially a simulation game; if one may call it a game, where investors buy and sell paper stocks fictitiously.
You as an investor can undertake paper stock trading without committing any real money.
How Do You Do This?
There are various sites available on the internet which allows investors to undertake such trading. You can choose your stocks and build a portfolio on such a website without committing any real money.
Prices of stocks on such investment sites mirror the actual prices of stocks on markets where they are listed. Thus your portfolio valuation will move up or down depending on how the stocks you have ‘bought’ have performed in real life on that day.
Benefits Of Stock Paper Trading Read more
Best Future Trading Strategies Online
Future trading strategies does not involve making of trading decisions on a day to day basis about buying or selling your commodities having a managed account, it only requires that you understand the dollars and cents of future trading profits and losses are reached.
This is a basic understanding you need to have if you intend to trade your own account.
Many of different variations and future trading strategies are used by future traders to speculate profits.
The most basic descriptions are illustrated as follows:
Buying goods to profit from an expected gain in the price. You will find that some people will purchase particular items hoping that the item will gain some profits in the future.
If accurate in foretelling direction of the time change, future trader can be sold later for a profitable price thus making profit. Should the price go down rather than an increment in profit, the trader will suffer a loss. Read more
Trading Oil For Major Profit
If you are an investor or are searching for something to invest your capital in that will truly bestow you a advantageous ROI as well as let you to sleep happily without stressing out regarding your money being lost in an the blink of an eye you should honestly consdier trading oil. Did you know that around 95% of people who get involved with financial trading lose a lot of money?
There are so many investing websites that are more interested in their bottom line, than your’s. Forex is very popular these days and it is one of those businesses where the vendors are building fortunes despite the fact that the people trading are losing more and more capital by the day. I want my trading account balance to escalate, not just the system vendor’s bank account. Read more
Commodities – How to Trade Futures Contracts
More and more individuals want to learn how to invest in commodities but one must understand that these investments are highly leveraged. In order for an investor to own a futures contract, only a small fraction of the value of the contract is needed to invest in it. If the investor correctly forecasts the price movement of the commodity traded, the investor has a great chance of profiting ten-fold for an initial investment of ten percent of the actual futures contracts value. That is how leverage works to the advantage of the investor in commodity trading. Of course leverage can work against the investor if he predicts wrong.
In this article we will cover the basics of how to trade commodities.
What Are Commodities?
Commodities are the essential things that people make use of everyday and are the basic essentials needed by a modern society. Read more
Why Trade Futures and Options?
Futures and options are classified under the derivatives financial instruments category. The derivatives have been in operation since time immemorial and have become more popular in the recent past. This is despite the fact that they have been faced with lots of criticism, with allegations that they make the markets prone to instability due to a lack of transparency.
The advantage of trading in futures and options is that the management of risks is improved and at the same time liquidity levels are increased. The value of the futures and options is based on another asset which is referred to as the underlying. This can be a stock or the market index.
An option is a derivative that gives one the right to buy or sell the underlying asset. There is no obligation. There are two types of options: call option and put option. The difference between the two is that the call option gives the investor the right to buy the asset whereas the put option is vested with the right to sell the underlying asset. Read more
Future Contract Trading Concept You Do Not Want to Miss
Future Contract is a standardized contract that traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price.
The future date is called the delivery date or final settlement date. The preset price is called the futures price. A futures contract gives the holder the obligation to buy or sell. Both parties of a “futures contract” must fulfill the contract on the settlement date.
The seller delivers the commodity to the buyer then cash is transferred from the futures trader who sustained a loss to the one who made a profit such as when the price of the commodities is brought at a preset price US$ 1000 and when the settlement date it has become US$ 800, but they still need to fulfill the contract preset amount that is US$ 1000. Read more
Managing Forex Commodity Trading Money For Maximum Profits
Before you start trading in forex or commodities, you need to first learn about the basics of money management. First and foremost you need to have a clear understanding about the system. Before investing in this high risk business, you should take a well calculated decision about how much money you can afford to lose while learning this system.
Forex and commodity trading is a high risk business. You should never attempt to invest your full savings in this business from the beginning. Instead first learn the system with practice account. Most of the providers offer practice accounts for the new traders. You can do mock trading in such accounts without investing any real money. Read more
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