How Are Prices Determined In The Commodity Markets?

October 26, 2010 · Posted in commodity trading · Comment 

A common understanding among most is that the prices of the commodities that are traded in the commodity trading market have their prices already predetermined with the help of the commodity trading exchange. This however is not true. What most of us would be surprised to learn is that the prices of these commodities are determined depending on the market conditions of demand and supply.

The reason why a commodity price increases is because the supply of the commodities is much lower than the actual demand. If the number of sellers for a particular product is much more then that the number of buyers then the prices of the commodity falls. The buying and selling of the commodity comes from various sources and all of this is then channelized to the trading floor so that it can be executed. This forms the basis of the price execution of the products in the commodity trading markets. The buying and selling orders are then converted to the actual sales and purchases in the commodity trading floor. The regulation then further states that the prices be further determined by the public outcry from a commodity trading pit or a ring and this does not include any kind of private negotiation to fix prices.

The prices of the commodities transaction are then recorded and this is then sent out to the number of people with the help of a huge telecommunication network system. If you want a clear picture of how the sales and purchases of commodities are made, the best visual picture would be the public auction that is action packed. It follows the same kind of principle; however it is not the same for the futures market where there is a two way auction that continuous to go on even after trading hours. This two way auction is because of the standard futures commodity trading contract which does not need any kind of description of what the sale has to offer.

In a two way commodity trading contract, the volumes of the goods that are bought and sold in the exchange floor are in a sufficient volume making it a much more practicable trade. However the public auction is where you will find a lot of emphasis on the sale of the product.

The commodity trading markets main purpose is to have an organized market place where members can buy and sell commodities that they are interested in freely.

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www.calloptionputoption.com an ISO 9001-2008 CERTIFIED COMPANY, provides tips and research analysis for indian stock market, options, stock futures, commodity, midcaps and index futures. any one can join and get benefit of research.

Commodity Trading is a Great Business

October 11, 2010 · Posted in commodity trading · Comment 

There are many reasons why trading the commodities market is a really good business to be in. You do not need a lot of money to get started, and the potential you can make is virtually unlimited. I would say 2 or 3 thousand dollars is an okay amount of trading capital to begin with. I do think it is better to start with maybe $5000 or so. One thing is for certain. If you can not make a profit with a few thousand in your trading account, you will not make money, no matter how much money you start with.

A great benefit of being in this business, is the fact you are your own boss. You can set your own hours. You make all your own decisions. You can live pretty much anywhere you want, and still be in the business of commodity trading. Basically, you set all your own rules. How nice is that !!!

A really cool part of this business is you can trade commodities, such as corn and soybeans in the grains market. You can trade silver and gold in the metals market. You can trade a wide variety of commodities from currencies to cocoa. As you can see, there are quite a few different and interesting markets you can trade in.

An amazing feature of this business ,is the amount of great leverage you get with commodity trading. As an example, one futures contract of corn controls 50,000 bushels of corn. Each one cent move in the market is worth $50. This can be a double edged sword. You can make an incredible amount of money in a short period of time, but the reverse is also true. That is why you must implement sound money management to be successful in the world of commodity trading.

I am not saying, in any way, shape, or form, that commodity trading is easy. Actually, it is very difficult to successfully trade commodities. Commodity trading is the major league of all trading markets. If you put in the time, and effort, to learn the proper strategies, methods, and principles, you can make a fortune in a relatively short period of time. About 5-10% of all commodity traders make most of the money. If you can get into this elite group, you will certainly become very wealthy.

Gary E Kerkow PhotoAbout Author
Hi, I’m Gary E Kerkow, founder of Tradingmarkets4u.com. This site provides information to help traders and investors become successful. I have over 20 years of trading experience including stocks, futures and options. Visit my website at http://www.tradingmarkets4u.com

Commodity Futures Market And Its Mechanisms

September 29, 2010 · Posted in commodity trading · Comment 

The general understanding about the commodity trading futures market is that it is a very complex and difficult to analyze market. However on the other hand it is not so! Infact there are a few basic facts that people need to know of which will change their perception about what the commodity trading futures market is and how they work.

The basic knowledge is that the commodity trading futures market or the exchange market as it is known is a public marketplace where the sale or purchase of commodities takes place. These sales and purchases are done at an agreed price so that commodities are delivered at a specified date. The broker is a person who needs to do the purchase or sales of the commodities. The broker is also a part of the organized exchange and the deal is completed according to the terms and conditions as given in the standardized futures contract.

The main thing that distinguishes the futures commodity trading market and a commodity market where commodities are bought and sold is that the futures market works with the help of contract agreements that follow a standard procedure. These agreements are responsible for delivery of a particular commodity at an amount as specified for a future month. It does not include the immediate transfer of commodities ownership.

In short the buying and selling in the commodity trading futures market does not need the buyer or the seller to be the owner of the particular commodity that they are trading for. With futures the main concern is receiving the delivery or making the delivery of the commodity, however the futures should not be bought or sold during the month of delivery. The previous sale also can be cancelled at any time with respect to the equal offsetting sale. If the sale is cancelled before the commodities delivery month then the trade cancels out completely. In this case the commodity is not received by the buyer or delivered by the seller.

In reality there is only a very small percentage very specifically less than 2% of the total of all futures commodity trading contracts that are settled or entered into through the deliveries. A larger part shows that there is a lot of cancellation of deliveries of commodities even before the delivery month in the manner that is described above.

This forms the basic mechanics or the functioning of the commodity trading futures market.

About Author
www.calloptionputoption.com an ISO 9001-2008 CERTIFIED COMPANY, provides tips and research analysis for indian stock market, options, stock futures, commodity, midcaps and index futures. any one can join and get benefit of research.

An Initiation To Commodity Futures Trading

May 25, 2010 · Posted in futures and options · Comment 

How It All Began

Commodity futures trading, as we know it today, came about for the first time in Japan in the 17th century, where rice was traded in future contracts. It was a period when farmers and buyers came together and decided to commit to each other future prices negotiated on suitable terms in exchange of grain for money. For example, a dealer would agree to buy a ton of rice at the end of the next month for a certain price from a farmer. This would be ideal for both parties, as the farmer would know how much he would get for his rice in advance, and the buyer could plan to raise the money he needed for the purchase. Contracts such as these became more and more popular and common, and were even used as collateral for taking loans. If the buyer could not take delivery of the rice, he could sell the contract to someone else. On the other hand, if the farmer could not deliver the goods, then he could hand over the contract to another farmer. Thus began commodity futures trading, as we know it today.

What Are Commodity Futures?

Today, most of the futures commodity trading exchanges are set up in a similar way. Members of the exchange do the actual trading on the floor. Stock stands for equity in a public company, and can be held as long as you want, whereas commodity futures trading contracts have a specified life. In the past, people used commodity futures trading methods generally to hedge risks and fluctuation in prices, or to take advantage of them, and not for actually buying into the commodity. The idea is that a contract requires delivery of the commodity within a certain predefined time period unless it becomes null and void. The person buying the commodity futures trading contract agrees to buy the specified commodity at a fixed price on a certain date. The person selling the commodity futures trading contract agrees to sell the commodity at a certain price on a certain date. As time goes on, the contract price fluctuates, and this brings about profit and loss in the trade. It is to be noted, however that, the delivery generally doesn’t take place. The contract is usually liquidated before its expiry. The entire trade is based on the idea that there will be no delivery, but we can speculate on the price of the underlying commodity at a future time to make money. Commodity futures trading is done all over the world now.

Different Types Of Commodities

There are many types of commodities that are traded in the international market. These can be very broadly categorized into the following:

• Precious metals like Gold, Platinum, Silver, etc.,
• Metals such as Aluminum, Copper, Steel, etc.,
• Agricultural products like Rice, Corn, Oils, Cotton, Wheat, etc.,
• Soft commodities such as Cocoa, Coffee, Tea, Sugar, etc.,
• Livestock like porkbellies, cattle, etc.,
• Energy commodities like Crude oil, Gasoline, Gas, etc.

David Rivera has traded commodities and options for one of the largest cash trading firms in the world. He currently owns and runs the following websites: Futures & Options Simulated trading: http://www.futuresoptionspapertrading.com Options Secrets course: http://www.deltaneutraltrading.com Price and Time trading: http://stock-commodity-trading.com

Copper Futures

March 4, 2010 · Posted in commodity trading · Comment 

Copper may be one of the original members of the commodity trading world. Copper was first worked about 7,000 years ago and its softness, color and abundance made it a widely desired commodity. Today, this metal is a perfect indicator of the world’s economy. The third most widely used after iron and aluminum, copper is found in such industrial applications as construction, industrial machine manufacturing and electronics. Because of its demand, trading copper futures has become an important part of futures trading.

Because of the high demand in a wide variety of applications, commodity investing in copper futures can be very profitable. It is likely that demand will only continue to increase as more applications for this versatile metal are found. As supplies become more difficult to locate, the value of this metal will continue to climb, creating additional investment options for traders in this unique metal.

Reasons To Invest In Copper Futures

Futures trading can be a solid way to profit from investing in copper. As with any other commodity, copper futures provide investors with the ability to buy and sell this metal; a fact which is true for any commodity when trading futures. Futures is the investment strategy where you can purchase the right to buy or sell a commodity at a later date; in addition, you are able to leverage your investments, allowing you to control large sums of a particular commodity for a small price. Copper futures allow you to do this with one of the most versatile assets in the world.

Contract Details For Copper Futures

o Basic Trading Unit – 25,000 pounds

o Units of Price – Dollars and cents per troy ounce

o Tick (Basic Unit Of Change) – $0.0005 per pound or $12.50 per contract. A one cent movement in price creates a $250 movement per contract

o Trading Periods – Options contracts are traded beginning with the current month and typically the following twenty-three months

o Options Trading – Options trading includes market orders such as stop limits, buy straddles and buy strangles, among others

o Margin Requirements – Margins are required for open futures and short options positions. The margin requirement for an options purchaser will never exceed the premium paid

Who Handles The Copper Futures Trading?

Many futures markets exist throughout the world for trading copper futures. One of the most important locations for trading is the COMEX in New York City. This market was formed by a merger between New York Mercantile Exchange and the Commodity Exchange in 1994 and is now the world’s largest commodity futures exchange. By trading copper futures at an exchange, you received several distinct advantages:

o Contracts Are Standardized – This ensures that the agreement is consistent with accepted business practices

o Contracts Are Secure – Exchanges are able to offer commodities trading that is affordable and has well-established risk management opportunities

o Contract Prices Are Real-Time – Prices are instantly available to traders

o Contract Parties Are Unknown – Since trades are made through commodity brokers, trades are made anonymously

o Contracts Can Be Delivered Safely – Although futures contracts are rarely ever filled and delivered, futures exchanges offer solutions for safe delivery

o Futures Exchanges Are Ethical – Exchanges offer safe, fair, and orderly markets that are protected by its strict financial standards and surveillance procedures

o Insurance Is Available – Exchanges offer futures options and hedging insurance for additional investment opportunities

Is Investing In Copper Futures Right For You?

Deciding to include copper futures in your investment strategy is a very personal choice. Your trading plan, your investment objectives and your financial situation should all be first considered. Since you are trading on the margin, copper futures are allow you to contract large sums of money and it is even possible to lose more that your original investment while futures commodity trading. You should make sure that you understand copper futures trading and the related conditions before you enter.

Conclusion

Copper is a highly desirable commodity and its futures market can be very profitable. With an ever-increasing demand and increased pressure to mine it, copper futures will continue to be a profitable investment commodity well into the future. If you understand the process and learn the conditions involved, you can be a successful trader in one of the world’s oldest commodities.

Author: Stephen Bigalow
Article Source: EzineArticles.com
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Simulated Futures – Perfect for Beginners

February 17, 2010 · Posted in commodity trading · Comment 

Are you interested in making money with futures trading? If you are, you are definitely not alone. Commodity trading is reaching an all-time high in popularity. Although many individuals are able to make a profit with futures trading, there are also those who end up losing money. To help ensure that you make money, as a beginner, not lose it, you will want to make sure that you know exactly what you are doing. You can not only do this by thoroughly researching futures trading and the futures market, but you can also do it by participating in a simulated futures programs.

As a beginner, you may be wondering exactly what a simulated futures program is. In short, a simulated futures program is a program that allows you to practice futures trading, but without risking any “real,” money. Simulate futures programs are available through many futures brokers. Many futures brokers allow their prospective clients to use their simulated futures program free for a short period of time, typically around thirty days. If, after that point, you still think that you need more practice, you should be able to continue on with your futures simulated program, but for a small fee.

Although it is nice to know how you can participate in a simulated futures program and have a generalized idea of what one is, you may be looking for more information, particularly why it is good for beginners, like you. As it was previously mentioned, a simulated futures program is a practice program that those just getting started in futures trading are advised to use. While each simulated futures program may very, often depending on the futures broker offering the program, many programs function in similar ways. For starters, you are given a test account, with “fake,” money that you can use like “real,” money to make trades.

When using a simulated futures program, you will have access to the same information and the same tools as a real, paying trader would. This is where the practice comes in. This practice and its value are immeasurable. With simulated trading, you are able to see which trades or moves of yours were good or bad. For instance, if you were to make money or a wise trade, you would likely remember your actions and keep them in mind for future use. The same can also be said for losing money or making bad trades. The information that you learn in a simulated futures program may help you become a successful futures trader.

Although many simulated futures program participates receive valuable hands-on information, which makes it easier for them to be successful when they start trading, there are others who realize that futures trading may not be for them. That is another reason why simulated futures programs are ideal for beginners. Unfortunately, many beginners learn about the ability to make money with the trading of commodities and they automatically assume that they can do the same, but futures trading isn’t right for everyone. That is why, if you are just getting started in futures trading or just learned about it, you may want to first try a simulated futures program.

Author: Ulysses Faust
Article Source: EzineArticles.com
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Futures Trading – Balancing Risk and Reward

January 9, 2010 · Posted in commodity trading · Comment 

There is a paradox in futures trading; get-rich trading usually leads to poverty. While it is true there are many people that do get rich in futures trading, the norm is to lose. Because most investors dont do the things necessary to be successful, they find failure is the only other alternative. This is a practice that requires training, experience and plenty of technical analysis; but then doesnt all successful investing?

The Risks of Futures Trading

First, lets back things up a bit; while futures trading can be very risky, the rewards can be very nice as well. Richard Dennis, a famed commodities trader, was able to parlay $1,600 of borrowed money into $200 million over ten years. While his results are truly extraordinary not everyone can expect the level of successful trading he achieved, there is good news for every investor; you can make money in futures trading. Now that we have made this statement, we can talk about futures trading.

Futures trading has a bad reputation as being filled with risk and, while there is risk, the truth is that futures trading is only as risky as a trader makes it. This is not the lottery or a trip to the casino; if you take a conservative approach, look for a reasonable return and make this a business, then the probability of success in commodity trading is very good.

What is Futures Trading?

Futures trading is different that investing in the stock market or bonds since you dont actually own anything; in futures trading, you are speculating on the future direction of the price in the commodity you are trading. This is like a bet on future price direction. The terms “buy” and “sell” merely indicate the direction you expect future prices will take. He or she must only deposit sufficient capital with a brokerage firm to insure that he will be able to pay the losses if his trades lose money.

Futures trading is a sort of insurance plan for those who are trading and investing. A farmer may sell futures on his wheat crop if he thinks the price will go down before the harvest; conversely, a bread manufacturer may buy futures if they think the price of wheat is going to rise before the harvest. Regardless of the price movement, both are guaranteed their price. The final component of the equation is the investor in futures trading who looks for changes in the futures markets and seeks to gain advantages by buying or selling at a profit.

What are Futures Markets?

In addition to agriculture, there are a number of different futures markets. Among these markets are:

Currency trading such as the US dollar, the British pound and the Japanese yen

Interest rate futures on financial transactions and bonds

Energy Futures on oil and gas

Food sector on items such as coffee, sugar and orange juice

Metals such as gold and silver

Each futures market has producers and consumers who need to hedge their risk from future price changes. The speculators, who do not actually deal in the physical commodities, are there to provide liquidity. This maintains an orderly market where price changes from one trade to the next are small.

Is Substantial Risk Inevitable in Futures Trading?

Minimizing risk in futures trading is easy; instead of taking delivery or making delivery, the speculator merely offsets his position at some time before the date set for future delivery. If price has moved in the right direction, he will profit. If not, he will lose. Greed and fear are the enemies of futures trading and the cause of most big losses.
Futures trading is not for everyone; it possesses risks that are limitless to an uninformed, undisciplined investor. With solid trading rules and an understanding of the markets and techniques required, futures trading can be a very rewarding endeavor.

Author: Stephen Bigalow
Article Source: EzineArticles.com
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Benefits of Futures Simulated Trading

December 18, 2009 · Posted in commodity trading · Comment 

Have you recently learned about the trading of futures? The commodity trading market is one that many are able to profit off of. For that reason, when many individuals, possibly just like you, first learn about futures trading, they often wonder if they can make a profit with it as well. Of course, you can, but to up your chances of success, you may first want to think about taking part in futures simulated trading, as there are a number of benefits to doing so.

Before examining the many benefits of futures simulated trading, you may be wondering exactly what it is. In a way, a futures simulated trading program is like a practice run. Simulate futures trading programs are offered by many futures brokers. These programs are designed to allow you to trade futures with a simulated account. You are given a set amount of money, to do with as you please. Futures simulated trading is just like real, trading, but without the risk of losing your hard earned money. Many futures brokers allow you to try their futures simulated trading programs free of charge, for around thirty days.

As for the benefits of futures simulated trading, there are an unlimited number of them. One of those benefits is the experience that you will gain. Futures simulated trading is ideal for anyone who is looking to try their hand at futures trading, but it is perfect for those who are just getting started, as most dont have a large understanding of the futures commodity market or trading. Being able to buy and sell commodities, in real market time conditions, is the perfect way to learn tips, as well as what works and what doesnt work, in terms of making a profit.

Another benefit of futures simulated trading is the knowledge that you will walk away with. Many of the futures brokers that offer simulated futures trading also provide participants, like you, with a knowledgeable broker. This broker can be contacted if you have any questions or concerns. You may also be able to learn helpful trading tips from your broker. In fact, you may be so pleased with the broker assisting you that you may want to use their services when you start trading!

Another one of the many benefits to first trying simulated futures trading is that you will get a good idea as to whether or not futures trading is something that you would be interested in perusing. Although many individual enjoy futures trading and make a profit with it, there are others who do not. Simulated futures trading lets you test out futures investing to see if it is something that you could see yourself doing in the future. If, by chance, you find that futures trading isnt right for you, you wont have to find out the hard way, by losing your money.

As outlined above, there are a number of benefits to futures simulated trading. With most brokers offering free futures simulated trading; you have nothing to lose by at giving it a try.

Author: Ulysses Faust
Article Source: EzineArticles.com
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Learning To Trade Futures

December 9, 2009 · Posted in commodity trading · Comment 

It has been said that success in this life is made up of equal parts of learning and yearning. For nearly everyone, it’s possible to accomplish your goals if you have sufficient desire and education. If your desire is to trade futures, you already have a direction; next, you need to couple a relentless pursuit of education with a strong desire to succeed at something very interesting and potentially rewarding. Commodity trading can be complex and frustrating but it is also well worth the effort.

Necessary Traits to Trade Futures

What are the four things necessary to trade futures? They are:

1. You need to have the desire to succeed as a trader There is a certain air that is needed to trade futurespart student, part bulldog, part daredevil. Desire to succeed will push you to learn more and trade futures smarter.

2. Persistence and motivation This is a by-product of your desire. Once you have the desire to succeed, you will be willing to put in the time to learn to trade futures and the motivation to make your new business a success.

3. Discipline, discipline, discipline Discipline to learn the nuances of how to trade futures, discipline to do technical analysis, and the discipline to make smart futures trades. If you trade futures like it is a business you will acquire the discipline to be successful.

4. Someone to help you get started Whether you learn from someone you know, from going to seminars, or reading books, you will need some help when you start to trade futures. It is important to learn the terminology, techniques and practices that make a successful trader and that knowledge is best passed down from person to person.

An Overview of Futures Trading

Futures trading is different that investing in the stock market or bonds since you dont actually own anything; in futures trading, you are speculating on the future direction of the price in the commodity you are trading. This is like a bet on future price direction. The terms “buy” and “sell” merely indicate the direction you expect future prices will take. He or she must only deposit sufficient capital with a brokerage firm to insure that he will be able to pay the losses if his trades lose money.

Futures trading is a sort of insurance plan for those who are trading and investing. A farmer may sell futures on his wheat crop if he thinks the price will go down before the harvest; conversely, a bread manufacturer may buy futures if they think the price of wheat is going to rise before the harvest. Regardless of the price movement, both are guaranteed their price. The final component of the equation is the investor in futures trading who looks for changes in the futures markets and seeks to gain advantages by buying or selling at a profit.

The Potential of Futures Trading

Trading futures is an excellent way to make money. It is said that Richard Dennis, a famed commodities trader, was able to parlay $1,600 of borrowed money into $200 million over ten years. Futures trading has a bad reputation as being filled with risk and while there is risk, the truth is that futures trading is only as risky as a trader makes it. This is not the lottery or a trip to the casino; if you take a conservative approach, look for a reasonable return and make this a business then the probability of success in commodity trading is very good.

Some of the better known futures markets are:

Agriculture This is a broad, commonly traded futures which includes such things as wheat, soybean and corn futures.

Currency Trading Currency trading, also known as FOREX (foreign exchange) trading, this involves buying and selling currency from many different countries such as the US dollar, the British pound and the Japanese yen.

Interest Rate Futures This market focuses on financial transactions, interest rates and bonds.

Energy Futures This market centers its attention on gas and oil futures.

Foods This sector includes items such as coffee, sugar and orange juice.

Metals This is one of the more popular and better known sectors. The typical commodities in metals are gold and silver.

Trade Anywhere

One of the real advantages when you trade futures is that you can literally do it anywhere. Since market data can be delivered easily via the Internet, you are free from any geographic restrictions, allowing you to implement trades from almost any location in the world.

Getting Started

In order to get started, you need to equip yourself with a good understanding of how to trade futures, which markets you will target, and above all, you need a trading plan. The trading rules in your plan will help you to understanding yourself and your responses to the things you see on the charts. You need an unemotional approach, backed up by the confidence that you can do it. This confidence comes from proving to yourself that you can win more often than you lose when you trade futures.

Author: Stephen Bigalow
Article Source: EzineArticles.com
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Managing Forex Commodity Trading Money For Maximum Profits

November 29, 2009 · Posted in commodity trading · Comment 

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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