Trading Commodity Futures By www.ProfitableTradingTips.com We wrote recently about Winning with Commodities.
What one trades are commodity futures. For example, when a trader expects the price of
gold to rise he can buy gold bullion or shares in an exchange traded fund that tracks the
price of gold bullion. And by trading commodity futures on gold bullion he can lock in a price
to buy or sell gold at a later date. Trading commodity futures is a common practice by
both the producers and buyers of commodities such as wheat, corn, soybeans or live cattle.
They do this in order to hedge their risk in case of a price change. And speculators
trading commodity futures buy and sell futures on the same commodities in search of profits. Basics of Commodity Trading The basics of any commodity have to do with
supply and demand and how these affect current price. Gold futures go up when the economy
weakens and down when the economy is strong. Gold bugs hoard gold as a hedge against inflation.
In trading gold a trader bases his trades on both fundamentals and short term market
sentiment. Traders jump in and out of the gold market based upon their analysis of prices.
When there is a drought in the American Corn Belt, Brazil or Ukraine wheat, corn and soybean
prices go up as traders expect a production shortfall. When there are ideal growing conditions
in the major grain producing regions of the world the prices of corn, wheat and soybeans
tend to fall as a market glut is expected. When there is another threat of war in the
Middle East the price of oil rises. Those trading commodity futures on oil will expect
to see higher prices in the short term but a return to normal in a year or so. The introduction
of fracking technology has greatly increased oil and gas supplies in the USA and is expected
to keep prices low and stable for years. Nevertheless, chaos in other oil producing regions of the
world tends to drive prices in the short term. Traders buy and sell futures contracts on
oil and other products based on their analysis of where the market will be in a few months
or years. Short Term Market Sentiment Markets are never totally efficient in the
short term. So, there is profit to be made in trading commodity futures when either good
or bad news hits the markets for precious metals, energy products or agricultural products.
Although the fundamentals of any commodity are available to all traders the tactics used
by each will differ. Thus trading commodities is a daily, hour by hour, minute by minute
job as the trader watches and searches for opportunities in his market. Knowing the fundamentals
of a commodity is essential to futures trading. Skill in the use of technical indicators and
the ability to be there when changes happen leads to profits in trading commodity futures.
Whether you prefer a heavily statistically based trading tool or something as basic and
easy to read as Japanese Candlesticks you can take advantage of short term market sentiment
in trading commodity futures. For more insights and useful information about
trading stocks, options, futures or Forex, visit www.ProfitableTradingTips.com.