| Commodities Futures Trading Can Be Profitable, Fun And Exciting |
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| Written by Jerry Diamond |
| Friday, 18 June 2010 17:42 |
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For most people, trading in the 'market' means buying and selling stocks and bonds. For some, though, this market is slow moving and unexciting and they prefer something with bigger swings and more profit potential. Commodities futures trading is just such a market and more and more people are becoming involved in this area.
For most people, trading in the 'market' means buying and selling stocks and bonds. For some, though, this market is slow moving and unexciting and they prefer something with bigger swings and more profit potential. Commodities futures trading is just such a market and more and more people are becoming involved in this area. Trading is similar to gambling in a casino in some significant ways. Luck certainly plays a part but so does intelligence and insight. Most good traders, like most good gamblers, will rely on some kind of system to boost their chances for success. Stock trading involves buying shares of equity in a listed company. As the company does well and grows its value increases and so should the value of its shares. This is how shareholders make money. They buy at a lower price than they later sell and the difference is their profit. If, however, share value goes down instead of up the investor will lose money (take a loss). With commodities, traders are buying and selling actual physical products. They may be agricultural (grain, sugar, coffee, O. J., beef, pork, etc.), industrial (gold, silver, copper and platinum) or financial (T-bills, currencies, etc). These commodities all have a fluctuating 'spot price' which is the cost for buying unit one of that product at this exact point in time. These prices are continually moving up and down. Commodities can also be traded 'in the future'. This is done through the use of a futures contract. This is an agreement to buy or sell a certain commodity at a certain price by a certain date in the future (called the delivery date). If you think the price of your chosen commodity will rise between now and the delivery date you want to buy (go long) and then sell the contract back after the price goes up. If you feel the price will be going down you would sell now (go short) and then buy back later at the lower price. When you BUY a futures contract you are said to be LONG in that commodity. Your hope is that the value of your contract, whether it be for pork bellies or live cattle, will increase between the purchase date and the delivery date. If the market goes up and you sell your contract back you will profit the difference between the purchase price and the selling price. You can also do the reverse, if you feel the market will be going down. You can SELL now, wait for the price to drop, and then buy back and pocket the difference. This is called going SHORT. Commodities futures trading can be profitable but carries certain risks. It can be a fast moving market and is not for the faint of heart. Huge leverage is available from brokers and just a small investment can allow you to control a large contract. Trade wisely! DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Get more information and details about commodities futures trading today! When you learn how to trade futures, you will be able to begin taking advantage of the many opportunities that present themselves to you easily! |