{"id":13224,"date":"2017-09-28T00:01:00","date_gmt":"2017-09-28T08:01:00","guid":{"rendered":"https:\/\/www.cannontrading.com\/tools\/support-resistance-levels\/?p=13224"},"modified":"2017-10-02T22:48:41","modified_gmt":"2017-10-03T06:48:41","slug":"how-commodity-trading-works","status":"publish","type":"post","link":"https:\/\/www.cannontrading.com\/tools\/support-resistance-levels\/how-commodity-trading-works\/","title":{"rendered":"How Commodity Trading Works"},"content":{"rendered":"<p>In July 2017, <em>Forbes<\/em><em><sup>1<\/sup><\/em> predicted an \u201cexplosion\u201d of activity in commodities trading, and that prediction may have been right on the money; a bullish U.S. commodities market recently danced from summer to fall. As of September 5 2017, energy and non-energy commodities saw a respectable gain, but <a href=\"http:\/\/www.worldbank.org\/en\/research\/commodity-markets\" rel=\"nofollow noopener\" target=\"_blank\">metals, minerals, and precious metals<\/a> jumped as high as 8.2 percent. All that glitters is not gold; maybe it\u2019s iridium! And maybe it\u2019s time you learned about commodities trading as an investment strategy.<\/p>\n<p><strong>What are Commodities and Commodities Trading?<\/strong><\/p>\n<p>In the U.S., futures and option markets are regulated by the Commodity Futures Trading Commission. A commodity is a product that can vary in quality or grade. However, a futures contract of a commodity product is standardized, regardless who is the producer\/seller. In addition to energy (oil and fuel, gasoline and natural gas), other commodities trading items include:<\/p>\n<ul>\n<li>Agro-based (cotton, corn, lumber, oilseeds, wheat, etc.)<\/li>\n<li>Livestock (cattle, chicken, pigs and pork bellies, etc.)<\/li>\n<li>Metals (aluminum, copper, nickel, zinc, etc.)<\/li>\n<li>Precious metals (gold, iridium, platinum, rhodium, silver, etc.)<\/li>\n<li>Soft \u2013 These products are grown and harvested rather than mined (Cocoa, Coffee, Fruit, Soybeans, Sugar, etc.)<\/li>\n<li>U.S. Equities<\/li>\n<\/ul>\n<p>The commodities market is driven by supply and demand. You can try to predict, based on previous years, what this year\u2019s cotton crop will yield. But if disease damages much of U.S. cotton crops, supply is lowered and demand prices rise.<!--more--><\/p>\n<p><strong>Futures Trading<\/strong><\/p>\n<p>Commodity traders try to make money by predicting the price (higher or lower) of a commodity during a specific timeframe. But buying futures is one of the popular ways to invest in the commodities market. You\u2019re buying commodities and, based on previous years\u2019 yields and this year\u2019s outlook, you\u2019re hoping to sell, at some later time, for a profit. Another nice feature of trading futures, is that you can sell first ( go short) if you feel prices are going to drop and buy later, hopefully at a lower price for a profit or at a higher price for a loss. At no time will a truck unload a thousand bushels of apples in your driveway because you will \u201cclose out\u201d before actual delivery.<\/p>\n<p>A futures contract specifies:<\/p>\n<ul>\n<li>Delivery terms<\/li>\n<li>Price<\/li>\n<li>Quality (grade)<\/li>\n<li>Quantity (size\/amount)<\/li>\n<\/ul>\n<p><strong>Hedging, Speculation<\/strong><\/p>\n<p>Large corporations often invest in futures trading to assist with cash flow management. They often use \u201chedging\u201d as a way to offset possible losses; for example, airlines need fuel, a commodity with fluctuating prices. They buy fuel at fixed rates \u2013 <em>hedging<\/em> \u2013 to combat the uncertainties of the energy market.<\/p>\n<p>\u201cSpeculation\u201d is an opportunity and risk for people who are not involved in commodity trading to trade on the fluctuation of commodities\u2019 prices. Speculation is usually initiated with a small margin amount . . . and the contract can be sold\/completed anytime during trading hours.<strong>\u00a0<\/strong><\/p>\n<p><strong>Spot Price<\/strong><\/p>\n<p>Futures contracts are . . . well, about the future. A commodity trade in which the commodity could be contracted and delivered now \u2013 <em>on-the-spot<\/em> \u2013 is the \u201cspot price.\u201d It\u2019s seldom that a trader buys at spot price; usually, it\u2019s a percentage over.<strong>\u00a0<\/strong><\/p>\n<p><strong>The History of Commodities Trading<\/strong><\/p>\n<p>Farming as a way of life began approximately 10,000 BC and led to a type of agricultural revolution circa 8,500 BC in which trading between communities began. \u201cThere is evidence that rice may have been traded as far back as 6,000 years ago,\u201d says <a href=\"https:\/\/www.universalclass.com\/articles\/business\/investments\/understanding-the-history-of-commodities-markets-and-futures-market.htm\" target=\"_blank\" rel=\"noopener\"> universalclass.com<\/a>, but the first recorded commodity futures trading took place in 17th century Japan. The commodities\u2019 prices were impacted by supply and demand as well as weather and conflict between settlements. Problems of storage while items were bought and sold surfaced.<strong>\u00a0<\/strong><\/p>\n<p><strong>Ways to Trade<\/strong><\/p>\n<p>You can choose from <a href=\"https:\/\/www.cannontrading.com\/services\/self-directed-online-futures-traders\"> self-directed<\/a> trading or use <a href=\"https:\/\/www.cannontrading.com\"> commodities brokers<\/a>; both have advantages, both have risks, and both can be rewarding! DIY (do-it-yourself) Online commodities trading includes day trading,\u00a0options,\u00a0mobile trading,\u00a0swing trading, or placing\u00a0<a href=\"https:\/\/www.cannontrading.com\/services\/traders-profile\">call-in orders<\/a> to a 24\/7 trading desk. Broker-assisted traders can take advantage of experienced advice from a knowledgeable professional who understands individuals\u2019 short- and long-term goals. Commission rates can be as low as $9.95 per side and the minimum to open an account is $3,000. As a broker-assisted trader, you\u2019ll have instant access to <strong><em>your<\/em><\/strong> broker.<strong>\u00a0<\/strong><\/p>\n<p><strong>Today is Not Too Soon<\/strong><\/p>\n<p><em>Investment in knowledge<\/em><\/p>\n<p><em>Pays the best interest.<\/em><\/p>\n<p>-Abraham Lincoln<\/p>\n<p>At Cannon Trading, we believe knowledge is power. The more you study commodities trading, the better you can manage risk, profit, and loss. As you begin learning, take small, careful steps and your commodities trading advisor will help you until you feel more knowledgeable about commodities trading. Check out some of the tools we provide for our friends and clients:<\/p>\n<ul>\n<li><a href=\"https:\/\/www.cannontrading.com\/services\/futures-trading-commission\">Day-Trader Lifeline<\/a><\/li>\n<li><a href=\"https:\/\/www.cannontrading.com\/tools\/2017-futures-calendar\">Economic Release and Futures Calendar<\/a><\/li>\n<li><a href=\"https:\/\/www.cannontrading.com\/trading-glossary\">Trading glossary<\/a><\/li>\n<\/ul>\n<p>For almost 30 years, we\u2019ve helped newcomers as well as experienced traders with success-driven guidance. Call 310.859.9572, 800.454.9572, or contact us today to learn how we can match or offer <a href=\"https:\/\/www.cannontrading.com\/services\/match-beat-rates\">among the lowest commission rates in the industry<\/a> without compromising integrity of service.<\/p>\n<p>1.\u00a0<a href=\"https:\/\/www.forbes.com\/sites\/bryanrich\/2017\/07\/30\/explosive-move-coming-for-oil-and-commodities-stocks\/#5745bc8c17f3\" target=\"_blank\" rel=\"noopener\">https:\/\/www.forbes.com\/sites\/bryanrich\/2017\/07\/30\/explosive-move-coming-for-oil-and-commodities-stocks\/#5745bc8c17f3<\/a><\/p>\n<p><strong><em>Disclaimer<\/em><\/strong><em> &#8211; Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. \u00a0Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In July 2017, Forbes1 predicted an \u201cexplosion\u201d of activity in commodities trading, and that prediction may have been right on the money; a bullish U.S. commodities market recently danced from summer to fall. As of September 5 2017, energy and non-energy commodities saw a respectable gain, but metals, minerals, and precious metals jumped as high [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[67],"tags":[1200,1199,15,1201],"class_list":["post-13224","post","type-post","status-publish","format-standard","hentry","category-future-trading-news","tag-commodities-brokers","tag-commodities-trading","tag-commodity-trading","tag-history-of-commodities-trading"],"_links":{"self":[{"href":"https:\/\/www.cannontrading.com\/tools\/support-resistance-levels\/wp-json\/wp\/v2\/posts\/13224","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.cannontrading.com\/tools\/support-resistance-levels\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cannontrading.com\/tools\/support-resistance-levels\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cannontrading.com\/tools\/support-resistance-levels\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cannontrading.com\/tools\/support-resistance-levels\/wp-json\/wp\/v2\/comments?post=13224"}],"version-history":[{"count":3,"href":"https:\/\/www.cannontrading.com\/tools\/support-resistance-levels\/wp-json\/wp\/v2\/posts\/13224\/revisions"}],"predecessor-version":[{"id":13231,"href":"https:\/\/www.cannontrading.com\/tools\/support-resistance-levels\/wp-json\/wp\/v2\/posts\/13224\/revisions\/13231"}],"wp:attachment":[{"href":"https:\/\/www.cannontrading.com\/tools\/support-resistance-levels\/wp-json\/wp\/v2\/media?parent=13224"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cannontrading.com\/tools\/support-resistance-levels\/wp-json\/wp\/v2\/categories?post=13224"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cannontrading.com\/tools\/support-resistance-levels\/wp-json\/wp\/v2\/tags?post=13224"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}