Commodities Trading

Written by Michael Federico
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The majority of Americans have at least a very basic understanding of the stock market. They have all heard "buy low, sell high," and most have caught the occasional market report on the news. The same cannot be said for commodities trading. Many have no knowledge at all when it comes to the commodities market, and many others only know what they learned from the movie, "Trading Places."

The risks involved with commodities trading are extremely high, and the fact that many people enter into it without knowing what they are doing makes losses even more probable. When a person buys a commodities futures contract he is, in essence, gambling. Unlike stocks, the supply and demand for commodities, such as oranges, coffee, and pork bellies, can take major swings due to natural forces and government influence. This makes it far more difficult to predict how the market is going to look from season to season.

Commodities Trading Training

There are several steps a trader can take to better prepare himself before entering into the commodities market. It is important that he learns how the market works. This includes basic areas such as how orders are placed and how contracts are sold, but he should also delve into more complex aspects of the process such as how to interpret trends, how to pick up on market indicators, and when the best times to buy and sell are.

One of the best ways to learn about commodities trading is to receive advice or tutorials from a professional. Consultants in the field host seminars and even offer individual training. In many cases, the courses are comprehensive, touching on all areas of commodities trading. Also, a person might have the opportunity to partake in a bit of paper trading, which allows him to go through all the motions of a trade without spending any money.

Commodities Training Systems

There are software programs and full-fledged electronic trading systems that can make commodities training easier for newcomers and experienced investors. Different systems utilize different strategies in trading commodities. For instance, some systems might only hold positions for one trading day, limiting the risk of large losses; while other systems will hold positions overnight to take advantage of market swings that are derived from futures indicators.

Commodities systems for trading e-mini futures are becoming incredibly popular. E-minis give people the chance to make some real money in commodities, but the initial costs are considerably less than those of standard futures orders. Systems like Inertia, Spartan, and Trident can be found online through specialty trading services. Many of these companies also offer training on the systems, and they will give a customer a chance to experiment with each to see which one suits his needs.

Commodities Trading on the Internet

Online trading services have begun to give major investment firms a run for their money. Each year, there are more options for people who trade over the Internet, and each year more people are making more money online. Most major services on the Web have expanded to include far more than simple stock trades.

It is now possible to trade commodities futures, stock options, and much more online. Costs for dealing with commodities are generally a bit higher than they are for stock trades. However, even the most expensive internet commodities trading service is far cheaper than most major investment firms.


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