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What Is Commodity Trading?

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1 What Is Commodity Trading? on Fri Feb 08, 2013 5:09 am

Advantages of trade goods commercialism

Leverage. trade goods futures care for margin, which means that to require a foothold solely a fraction of the entire price has to be out there in profit the commercialism account.

Commission prices. it's plenty cheaper to buy/sell one derivative instrument than to buy/sell the underlying instrument. as an example, one full size S&P500 contract is presently price in excess off $250,000 and will be bought/sold for as very little as $20. The expense of buying/selling $250,000 can be $2,500+.

Liquidity. The involvement of speculators implies that futures contracts square measure moderately liquid. However, however liquid depends on the particular contract being listed. Electronically listed contracts, like the e-minis tend to be the foremost liquid whereas nether region listed commodities like corn, fruit crush etc aren't therefore promptly out there to the retail monger and square measure costlier to interchange terms of commission and unfold.

No Time Decay. choices suffer from time decay as a result of the nearer they are available to end the less time there's for the choice to come back into the money. trade goods futures don't suffer from this as they're not anticipating a specific strike worth at end.

Disadvantages of trade goods commercialism

Leverage. may be a double edged weapon system. Low margin needs will encourage poor cash management, resulting in excessive risk taking. Not solely square measure profits increased however therefore square measure losses!

Speed of commercialism. historically commodities square measure pit listed and so as to trade a speculator would wish to contact a broker by phonephone to put the order World Health Organization then transmits that order to nether region to be dead. Once the trade is stuffed nether region monger informs the broker World Health Organization then then informs his consumer. this could take some take and therefore the risk of slippage occurring may be high. on-line futures commercialism will facilitate to scale back now by providing the consumer with an instantaneous link to Associate in Nursing electronic exchange.

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2 Thanks on Sun Feb 10, 2013 11:31 pm

Thanks For postingnice discussion on commodity trading. I think your article useful.

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3 Re: What Is Commodity Trading? on Mon Feb 11, 2013 3:50 am

Good Article !
Although commodity market is risky but this is the best source where you can make more money. "Risk is there where is money". So if you want to earn more then you will have to bear some risk. But this can be minimized from the help of experts. So, when you trade in commodities then always consult with experts who can guide you which stocks are the best to trade at particular time. This way you can make more money & can generate a good source of income.

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