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Sell Commodity Futures
Traders will sell commodity futures when they believe that the price of the commodity will drop substantially between the time they sell the commodities contract and the contract settlement date. The trader will rarely hold contracts to settlement but will buy a commodity futures contract with the same settlement date in order to exit the commodities trading position. When the spot price is sufficiently below the contract price it is profitable to sell commodity futures and then buy at the lower price to profit from trading commodities. Traders will commonly use both fundamental and technical analysis tools in order accurately predict commodity price movements. Technical analysis tools such as Candlestick analysis have helped commodities traders for centuries in anticipating how a commodity will trade in coming hours, days, weeks, and months. Anyone beginning commodity futures trading will do well to take Commodity and Futures training in order to understand basic commodity trading and to profit by successfully trading commodity futures.
Although a trader will enter into a contract to sell commodity futures he or she will only rarely deliver on the contract. This is the business of producers and buyers of commodities and is called hedging. In this case a gold mining company may sell gold futures or an agricultural cooperative may sell corn futures. An oil company could, in fact, sell oil futures. In each case the seller will be in the business of the commodity in question and will, in fact, be able to produce the commodity for delivery. The company is hedging as a technique of controlling investment risk. This is a common practice and the backbone of the commodities markets. The large volume and liquidity caused by large buyers hedging risk provide the trader with an excellent opportunity to buy commodity futures or sell commodity futures for profit. The trader learns to predict market movement with the use of Candlestick pattern formations and similar technical analysis tools in order to decide whether it will be profitable to buy or to sell commodity futures.
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Traders will sell commodity futures
when they believe that the price of the
commodity will drop substantially
between the time they sell the
commodities contract and the contract
settlement date.
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The trader will rarely hold contracts to
settlement but will buy a commodity
futures contract with the same
settlement date in order to exit the
commodities trading position.
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When the spot price is sufficiently
below the contract price it is profitable
to sell commodity futures and then
buy at the lower price to profit from
trading commodities.
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Technical analysis tools such as
Candlestick analysis have helped
commodities traders for centuries in
anticipating how a commodity will
trade in coming hours, days, weeks,
and months.
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Anyone beginning commodity futures
trading will do well to take Commodity
and Futures training in order to
understand basic commodity trading
and to profit by successfully trading
commodity futures.
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An oil company could, in fact, sell oil
futures. In each case the seller will be
in the business of the commodity in
question and will, in fact, be able to
produce the commodity for delivery.
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The large volume and liquidity caused
by large buyers hedging risk provide
the trader with an excellent
opportunity to buy commodity futures
or sell commodity futures for profit.
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The trader learns to predict market
movement with the use of Candlestick
pattern formations and similar
technical analysis tools in order to
decide whether it will be profitable to
buy or to sell commodity futures.
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Although a trader may sell commodity
futures with settlement dates long in
the future he or she need not wait for
the settlement date to exit the
contract.
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The trader can exit his of her position
for a profit and never worry about
sleeping through the settlement date
and having to deliver several hundred
head of live cattle to a stockyard in
Kansas City or Chicago!
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Like much of trading derivatives the
trader enjoys a fair amount of
leverage when he or she decides to
sell commodity futures.
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With a relatively small investment
compared to the actual price of the
commodity, in contract volume, the
trader can make a substantial profit as
compared to his invested capital by
careful and well practiced use of
technical analysis using Candlestick
basics.
