Online Commodity Trading

Written by Jacey Harmon
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Commodities are defined as any natural resource or physical substance that can be traded though the futures markets. Oil, corn, rubber, natural gas, sugar, and coffee are all considered commodities. Prices for commodities are set by the futures markets, which have a direct impact on what consumers pay for goods. Price movements in commodities like oil and gas will have an immediate impact on the retail market, while movements in other commodities will have a lagging effect.

There are two types of commodities traders: hedgers and speculators. Hedgers are generally involved with producing or buying a specific commodity. They utilize the futures markets to protect themselves from adverse price movements. Speculators are involved in the market with the sole intention of capitalizing on fluctuating prices.

Trading Commodities Online

The Internet has become a haven for those who want to become commodities traders. Many futures brokers will offer trades as low as $3 for unassisted trades or $10 for assisted trades. It is important for a commodity trader to utilize both technical and fundamental analysis. Technical analysis is the study of the market via price and volume charts. Fundamental analysis is the studying of the underlying cause of a price movement. There are hundreds of websites available for commodities traders that specialize in providing both technical and fundamental research tools.

It must be noted that any futures trading--commodities or financial--carries a high degree of risk. It has been said that nine out of every ten people who trade futures lose money. One should not participate in futures trading without a solid understanding of how the futures market works. The opportunity for double and even triple digit gains is real, but there is equal risk of losing a substantial amount of money.

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