Archive for the ‘commodities futures trading’ Category
Commodity Futures Trading
September 3rd, 2010
Commodity futures trading is a type of investment where one can make money by speculating on the price of a certain commodity going up or down in the future. Commodities are usually the essential things that people make use of everyday. Most of the times, these commodities are the basic essentials needed by a modern society.
When talking about certain commodities being traded in the futures market, it must meet certain conditions to make it allowable for trading. One of the conditions is that the commodity should be standardized. In trading agricultural and industrial commodities, the traded commodity should be in its basic raw and unprocessed state. In this case, Wheat may be traded in the futures market but not flour.
Another condition that a certain commodity has to meet is that the perishable kind should have adequate shelf life. The reason for this is that these commodities are traded with their delivery scheduled deferred at a future time. Therefore, there may require a long shelf life so that the commodities may be delivered with its quality still good and intact. Another condition that a certain commodity should meet is that it should have a price that changes often, creating some uncertainty as well as opportunity to profit.
The history behind futures trading in commodities evolved from the farmer’s need to earn more from every harvest. Before commodity futures trading started, the farmers were always at the mercy of the dealer when it comes to pricing and selling their harvests. Dealers usually set the prices and the farmers cannot to anything but accept the terms. In a way the farmers were being exploited by some dealers and so another form of selling their harvest.
In the search for having a more fair system of doing business, farmers began offering future harvest to interested buyers. The farmers started giving their own terms for the future harvests to dealers. The transaction consists of commodities offered as a certain price and to be delivered as a specified date. Contracts were then drawn up between the farmer and the interested buyer that specified the certain amount of commodity to be delivered at a particular time in the future. From this system, what is now known as futures trading has begun.
It was sometime in 1878 that a central dealing facility for such commodities contracts was established in Chicago. In this facility, farmers and dealers began initially in spot dealing of their grains that was immediately delivered upon a reached settlement in price. It eventually evolved into futures trading when farmers started committing future harvests to interested dealers willing to buy to ensure that their grains supply are maintained in the future.
In the beginning, futures trading initially consists only of a few farm commodities such as grains. But later on, a huge number of other commodities joined in. Now there are futures trading markets that deal in precious metals such as gold, silver and platinum. There is also a futures trading market for livestock and cattle as well as for energy products such as crude oil and natural gas. It has gone on to include futures trading in coffee, orange juice ad industrials such as lumber, cotton and even on interest rate bearing instruments such as currencies and stocks.
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Commodities Futures Trading Is Profitable, Fun And Fast-Moving
June 18th, 2010
For most people, trading in the ‘market’ means buying and selling stocks and bonds. For some, though, this market is slow moving and unexciting and they prefer something with bigger swings and more profit potential. Commodities futures trading is just such a market and more and more people are becoming involved in this area.
Any type of trading is akin to casino gambling in some respects. And, as in gambling, luck plays a role but there are other factors as well. A successful trader, just like a successful gambler will usually utilize some type of system to better his or her odds.
Stock trading involves buying shares of equity in a listed company. As the company does well and grows its value increases and so should the value of its shares. This is how shareholders make money. They buy at a lower price than they later sell and the difference is their profit. If, however, share value goes down instead of up the investor will lose money (take a loss).
With commodities, traders are buying and selling actual physical products. They may be agricultural (grain, sugar, coffee, O. J., beef, pork, etc.), industrial (gold, silver, copper and platinum) or financial (T-bills, currencies, etc). These commodities all have a fluctuating ‘spot price’ which is the cost for buying unit one of that product at this exact point in time. These prices are continually moving up and down.
Commodities can also be traded ‘in the future’. This is done through the use of a futures contract. This is an agreement to buy or sell a certain commodity at a certain price by a certain date in the future (called the delivery date). If you think the price of your chosen commodity will rise between now and the delivery date you want to buy (go long) and then sell the contract back after the price goes up. If you feel the price will be going down you would sell now (go short) and then buy back later at the lower price.
Buying a futures contract puts you in LONG position. If the prices go up you will earn a profit when you sell the contract back. Selling a futures contract puts you in a SHORT position, hoping prices will drop. Then, when you later buy the contract back you will also profit. If prices go against your prediction your trade will close at a loss.
There are definite risks in commodities futures trading but it also holds significant upside potential too. Leverage enables individual traders to control large contracts with relatively small amounts of money but the chance of losing is always present. This market moves fast and is not for the weak of heart. Trade smartly!
Find more information and details about commodities futures trading today! When you learn how to trade futures, you will be able to take advantage of the innumerable opportunities that present themselves to you easily!
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China to offer stock index futures trading in April.
April 6th, 2010
The bullish response to the news may signal China’s embrace of a full of futures markets.
On March 26th’s breaking news from Shanghai Chinese blue chip shares hit their 8 week highs.
The Yuan is up to 6.8263 against the U.S. dollar, which is higher than it was at Friday’s close at 6.8273.
Shanghai Composite Index moved 64.08 points which is over 2 percent to close at 3,124. January 21st was the previous high.
The Shenzhen Composite Index went up 1% to 1,201.
According to analysts the 3,100 point level is an important psychological benchmark for the market. The benchmark being met with higher trading volume is a definite plus.
To quote Ping An, Securities analyst Li Xianming of Shenzhen, “With the introduction of the stock futures, investors refocused on blue chip shares, as their previous performance has lagged behind the market.”
The big winners include Chinese auto makers, lenders, and brokerages.
China’s three largest financial institutions reported better-than-expected annual earnings.
China Construction Bank Ltd. rose 2.3 percent to 5.71 Yuan Industrial & Commercial Bank of China Ltd. rose 2.5 percent to 5.02 Yuan Bank of China Ltd. rose 3.1 percent to 4.36 Yuan
The two largest brokerages were gainers as well. Haitong Securities Co. gained 2.8 percent to 17.07 Yuan Citic Securities Co. rose 3.5 percent to 28.36 Yuan
The auto makers surge as well. Zhejiang Geely Holding Group signed a deal Sunday to buy Ford Motor Co.’s Volvo Cars. SAIC Motor Co. Volkswagen AG (VGC), the local partner of General Motors Co. at 20.45 Yuan climbed 3.7% Ford Motor Company partner, Chongqing Changan Automobile Co. at 6.97 Yuan increased 1.2%
With the announcement and China’s Blue Chips increasing on it looks like capitalist principals are taking deeper root. It is highly unlikely that the surge in the sectors of auto manufacture, lending, and brokerages is mere coincidence.
James Horne has been a financial analyst for over 10 years. He is CEO of Pure Reason LLC, the home of Shadowtraders. His voice has been heard by hundreds of students learning to trade Futures with Shadowtraders online day trading strategies. Before you purchase any trading software, make sure you attend Shadowtraders Monday Night Webinar, and hosted by Barbara Cohen
Commodity Futures Trading – How To Reduce Risk And Aim For Success
October 21st, 2009
Thinking about going into online trading of commodity futures? If so then I am sure you are aware there is a lot of risk involved. Let’s have a look at the risk and how we can reduce it to a minimum.
One good thing about trading commodities is that there will always be an intrinsic value in the product. So for example the value of a quantity of nymex gas or of crude oil is never going to be nil.
Keep your wits about you and do not get carried away with your successes. Do not either have the mentality of making up your losses as soon as possible. If you do then you end up gambling and this is not what commodity trading should be about.
You need to try as much as possible to detach your emotions from your trading. If you are emotional with your losses or with your gains you are in for a roller coaster of a ride.
The problems now arise at times in that a trader who is bullish on gold my believe its a great time to invest in gold. He or she takes 10 gold contracts at a total of $100,000. If the price were to move up to $1100 an ounce then there is a nice profit to be had. If the price were to reduce by $100 an ounce however, and devalue to $900 an ounce, then the trader has to face up to a large loss unless they can meet the margin call by their broker by placing further funds in their trading account.
If you feel the time is correct to become bullish with gold and go in for 10 contracts at a cost of $100,000 and a value of $1 million and the price of gold were to move upwards to $1100 then all is looking good for us having doubled the value of our investment. But lets say that the value of gold were to dip to $900 an ounce then we are on wipe out unless we are capable of meeting the margin call by the broker to place more funds into our account.
With this sort of exposure in the market we could end up with serious losses. Its all very well to see things very positively and continue to believe in profit after profit. But at the same time we need to be realistic and know that there will be times when we hit a few losses. As such we need to have the funds available to deal with the losses.
So the basics to be aware of if you are just setting out with your commodity future trading then take it easy – do not rush to make lots of money as you will most probably end up being over exposed and therefore open to some hefty account losses. Its best to learn with experience, but while you are learning do think about tomorrow and keep enough funds available for times when things take a downturn.
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where is the number one futures trading site?
January 14th, 2009
i mean for commodities futures?
Try CBOT.com or CME.com, of course depends on what futures you want to trade.
Rival
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Do you know some sources where we can learn about futures trading?
January 12th, 2009
I want to learn about trading some commodities like oil, metals, or agricultural products like coffee or cocoa. The more the better.
I may want some websites that offer free membership or else.
I found a website that may be good for a starter like you. This website is categorised in energies, financials, grains, meats and metals. There are also many sub-menu which you may care like crude oil, rbob gasoline, Us dollar, soya bean, wheat, coffee, sugar, gold, platinum… You may discover yourself.
You should also read materials from financial magazines about macroeconomics.
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