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Learning About Commodity Futures
Learning about commodity futures should start with formal Commodity and Futures Training. Learning about commodity futures should continue with an organized approach to understanding fundamental and technical analysis of commodities. As with all trading it is important to understand the basics of the equity being traded as well as the markets a commodity trades in. Traders will often seek the guidance of an experienced trader, read books on trading commodities, and trade in simulation. However, a commodity trader arrives at his or her knowledge it is important to develop a trading strategy and to get used to tracking commodity profits and losses. It is often through mistakes that commodities traders learn the most. The beginning trader in learning about commodity futures had best start by understanding that commodity trading is trading in futures and what that entails.
Futures trading is the buying and selling by contract of the right to buy or obligation to sell a standardized quantity of a commodity for a specified price at a given date in the future. Futures contracts can be bought and sold up until the day of contract expiration and be bought or sold in contracts due several years in the future. Traders deal in the likes of oil futures, corn futures, and gold futures as well as futures on interest rates and more exotic creatures such as carbon credits. Commodity futures trading is engaged in by companies that produce, process, and buy commodities. These companies are hedging their investment risk. New traders should finish learning about commodity futures before engaging in options trading such as buying puts and buying calls on commodity futures.
When trading commodity futures the original contract is based on how the market is pricing the commodity at the time. If the expectation is that the commodity price will change substantially the price of the commodity future will be significantly different than if the market expects the price to remain flat for months or years to come. Both buyers and sellers expect to profit from price movement of the commodity and both expect the price to move in opposite directions. As time passes and the commodity price moves up or down the value of the futures contract, the commodity futures price, will change. Learning about commodity futures starts with the basics of how prices move. Learning about commodity futures then has to do with learning about fundamental analysis of the commodity traded and technical analysis of how other traders are pricing the commodity.
2. Learning about commodity futures
should start with formal
Commodity and Futures Training.
Learning about commodity futures
should continue with an organized
approach to understanding
fundamental and technical analysis
of commodities.
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3. As with all trading it is important
to understand the basics of the
equity being traded as well as the
markets a commodity trades in.
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4. Traders will often seek the
guidance of an experienced trader,
read books on trading
commodities, and trade in
simulation.
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5. However, a commodity trader
arrives at his or her knowledge it is
important to develop a trading
strategy and to get used to tracking
commodity profits and losses. It is
often through mistakes that
commodities traders learn the
most.
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6. The beginning trader in learning
about commodity futures had best
start by understanding that
commodity trading is trading in
futures and what that entails.
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7. Futures trading is the buying and
selling by contract of the right to
buy or obligation to sell a
standardized quantity of a
commodity for a specified price at
a given date in the future.
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8. Futures contracts can be bought
and sold up until the day of
contract expiration and be bought
or sold in contracts due several
years in the future.
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9. Traders deal in the likes of oil
futures, corn futures, and gold
futures as well as futures on
interest rates and more exotic
creatures such as carbon credits.
Commodity futures trading is
engaged in by companies that
produce, process, and buy
commodities.
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10. These companies are hedging their
investment risk. New traders
should finish learning about
commodity futures before
engaging in options trading such as
buying puts and buying calls on
commodity futures.
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11. When trading commodity futures
the original contract is based on
how the market is pricing the
commodity at the time.
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12. If the expectation is that the
commodity price will change
substantially the price of the
commodity future will be
significantly different than if the
market expects the price to remain
flat for months or years to come.
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13. Both buyers and sellers expect to
profit from price movement of the
commodity and both expect the
price to move in opposite
directions.
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14. As time passes and the commodity
price moves up or down the value
of the futures contract, the
commodity futures price, will
change.
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15. Learning about commodity futures
starts with the basics of how prices
move. Learning about commodity
futures then has to do with
learning about fundamental
analysis of the commodity traded
and technical analysis of how other
traders are pricing the commodity.
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16. A trader in corn futures will need
to follow weather forecasts and US
farm policy. Bad weather destroys
crops and drives up prices.
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17. Price supports lead to profits and
the planting of more crops which
will drive corn prices down. Gold
futures traders will watch for signs
of inflation, national debt, and
catastrophic events throughout the
world as assaults on national
currencies typically drive up the
price of gold.
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18. However, only a handful of traders
will be the first to trade when news
of an important event surfaces. The
rest of us need to trade the
reactions of the commodities
markets.
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19. Using time honored tools such as
Candlestick pattern formations a
trader can let the market’s price
movements help predict where
commodity prices will go next.
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