The first thing that you have to know about Commodities trading is that this is different from the trading that happens on the stock market. It is sort of speculating the future prices of the commodities that you will be trading. The known locations where this kind of trading happens include the following. 1. New York Mercantile 2. Chicago Board of Trade 3. New York Cotton Exchange 4. Chicago Mercantile Exchange As for the Commodities markets, here are some of the most popular that are being traded these days. 1. Currency trading. This is widely known as the FOREX that stands for the foreign exchange. This involves the process of buying and selling whatever currency the trader chooses to bet on. The trader will study the movement of the economy of the countries where the currencies come from. This way, they will be able to strategize whether they are gambling on a good investment or if it will be better to wait for some time before trading in. Some of the well-known currencies that are being traded on for this purpose include the British Pound, Japanese Yen and the US Dollar. 2. Agriculture. This actually has a broad scope. This will all depend on the crops that the farmers grow and the people who are interested with such. For example in the case of wheat, a farmer will sell the Commodities of his crop if he thinks that its price will go down before he could even harvest it. But if a bread manufacturer thinks that the prices of wheat will rise before its harvest, he will decide in...
For starters, investors should know what Commodities trading is all about. The simplest definition to understand about Commodities trading is that it is a type of trade wherein a type of commodity is being traded on a market with transactions noting a particular type of commodity sold and bought at a specified price and deliverable from a specified time in the future. What Commodities trading is all about can be summed up in a typical transaction between two parties. One party is a producer of a certain commodity while the other is the buyer. The producer offers the buyer a certain commodity deliverable in the future, let’s say, six months from now. The buyer, who may be looking to ensure that he has ample supply of the said commodity in the future, would surely be interested. Both parties then make up a contract wherein a specified amount of the commodity may be deliverable for a particular time in the future is agreed upon. That, in a nutshell, is what Commodities trading is about. For others, it might still be a little bit complicated to understand. But the essence of Commodities trading lies in the understanding between the commodity supplier and the buyer of the commodity. Sometimes during the course of time between the agreement and the time of delivery, the contract may change hands as the buyer may wish to trade the contract for other lucrative opportunities. Commodities trading started with grains such as wheat as the main commodity traded. Trading eventually comes to include other commodities such as lumber, crude oil, coffee and even orange juice. Precious metals...
Diversification Is Key To Success When investing in Stocks, Bonds, Mutual Funds, Commodities and ETF’s and just about every other legit investment available. Why is it that some people only buy one or two stocks? Others may have 15 stocks but have 50 percent of their investment assets in just one of those 15 stocks. In Wall Street we refer to this type of behavior as concentration. Some firms call it over-concentration. When this happens in a brokerage firm it is always considered dangerous. It is so dangerous, in fact, that if the brokerage firm is using a concentrated stock position as capital, then the market value of the security in question is given a haircut. This means that the full market value of the security is chopped by some fixed percentage in any capital computation. In other words, if you are over-concentrated, you don’t get full value. Some of you may have margin accounts. Its always best to have cash ownership of stocks you invest in. If you own stocks on margin, it is our opinion that you will get sold out on margin. Normally in a margin account you put up 50 percent of the value of the stock you acquire in cash. If equity falls below 35 percent, you get a margin call. Now, brokerage firms love it when clients have 15 or 20 different stocks in a margin account. If there are some bonds in that account, guess what, they love it even more. Why? Because brokerage firms know that stocks represent risky investments. Something can always go wrong in any one situation. Maybe something...
