Commodity Price Introduction
When looking at commodity trading and each commodity price, it can be very confusing at first. Most of the trading works by investors buying and selling futures contracts, instead of trading directly in commodities. Futures trading is very similar to trading stocks and bonds. The only difference is that the futures contracts have an expiration date unlike stocks and bonds. The main component when discussing commodities is the commodity prices and the quotes associated with each. There are a lot of commodities that can be traded, a few of which include gold, coffee, live cattle, natural gas and corn. Depending on the type of commodity you are trading, you will find that you must trade on a specific exchange and that each commodity has a different commodity price. They are not all traded on the same commodity exchanges.
Gold is a commodity that most new traders begin trading in due to its historical track record regarding its commodity price. It is very accessible, and has very few troubles in the commodities markets. Coffee is referred to as a soft commodity when compared to metal, energy, grain and the commodity price for coffee is quoted in cents per pound. Live cattle futures are traded on one of the oldest exchanges in the United States, the Chicago Mercantile Exchange (CME), and the commodity price is established in cents per hundredweight. When commodity investing, that natural gas is noted as dollars per million on the New York Mercantile Exchange (NYMEX). Corn is also another commodity frequently traded and is known to have the longest history in commodities.
Commodity prices have gone through the roof recently and are one of the fastest growing market sectors of the financial markets. When trading commodities, there are a slew of them to choose from. In addition to the few mentioned above, other commodities include wheat, soy meal, sugar, steel, copper, platinum, crude oil, soy beans, oats, and gasoline. When commodity trading, you should aim to buy low and sell high, or sell high and buy low. You must also understand the concept of commodity trading hedgers. Hedgers aim to guarantee each commodity price in order to lock in profits or to avoid excessive losses. There is also the concept of commodity trading speculators. They are on the opposite end of the hedger and they have no business interest in the commodities. They simply bet on whether or not the price of the commodities will go up or down. It requires very little margin, but it can lead to very big losses as well. If you plan to trade commodities, it is very important that you have a good credit standing when you go to apply for a commodity trading account. It is more important than when trading commodities, than it is when trading stocks.
The above is just a quick introduction to the commodity price and various commodities trading concepts. If you are seriously interested in getting involved in this financial market, there is a wealth of free knowledge available to you on the internet. It is important, to however, invest in some sort of commodity training classes, e-books, etc, before you get started.