Commodity Trading – Basic Knowledge

Commodity Trading – Basic Knowledge

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There is always a risk in investing money in trading market. The risk is worth the profit that people can get and that is why there is always someone who wants to dive into the world of trading. Among many types of trading, commodity trading is one of the most volatile one.

The situation may change in just a matter of minutes and it is the one that make the risk greater than other type of trading.

But that doesn’t stop people from trying their luck to become a trader in commodities market, and for that, people need to learn the whole thing, start from the basic.

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Types of Commodity Trading

All around the world, there are at least 4 types or categories of trading commodities and they are:

  • Livestock and meat ➠ Which included live cattle, feeder cattle, pork bellies, and lean hogs
  • Agricultural ➠ Which include raw materials that come from agriculture field such as cotton, corn, coffee, sugar, rice and wheat
  • Metal ➠ Which include gold, silver, copper and platinum
  • Energy ➠ Which include natural gas, crude oil and gasoline

Those four categories, especially livestock and agricultural is the one that has been traded by ancient civilization many years ago, and most likely it will stay that way in the future.

Criteria of Commodity

The main four categories of commodity trading that was mentioned before share several things in common.

There are several criteria that make those materials as part of commodity and they are:

  • Deliverability

These criteria refer to the fact that those material can be delivered physically in the trading process

  • Tradability

The material must have investment or tools that can help people to trade it

  • Liquidity

It refers to the fact that there is always buyer and seller that keep transacting to each other about the material. Which means that the material is always in need and move from one hand to another

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Start to Trade on Commodity Trading

Gathering information about commodity trading is the first step that everyone should do to become trader in this area.

There are many source of information regarding this topic and the best source is no other than a successful trader.

Those are the people who manage to earn profit in commodity marketplace and they are the right person to learn the strategies on how to succeed in this market.

Learning from other source is also much recommended. There are tons of learning source in the internet where people can learn about commodity trading, and part of it.

There are things such as gold standard for those who want to trade in metal. Learn how to energize the market or at least recognize the thing that energize the market.

And learn about exchange that takes places around the world. Also learn about forward contracts and hedging, and also other thing as well.