Commodity futures trading meaning

Commodity charts are info-graphic tools that involve graphs that show the price movements or changes of commodities over a time period. Commodity charts are powerful tools in the hand of a commodity forecaster who uses it to make informed trading choices. There a variety of them such as; line graph, candlestick

COMODITIES ARE NOT STOCKS

Most people erroneously believe futures, or commodities are like stocks, it is true that both are traded’ but the difference is given below.

- While you own stocks, you contract for futures

The fundamental difference between the both is that you ‘own’ stocks while you enter into a contract for commodities, in stocks you buy a part of a company in which you desire to invest in. while in commodities you are entering into an agreement to buy or sell a particular commodity. It is important to note that in futures, you are trading contracts not the actual commodity. This makes it possible for one to benefit both when the prices go up and when they fall because, what is true is that you don’t have to own the commodity to sell it.

- Futures have a time limit.

They always have a delivery time attached to them, because the agreement is to supply a certain commodity but you can hold stocks as long as the issuing company exists.

WHY THE NEED FOR TRADING CHARTS?

The commodity market or futures market first started in the 19th century when a central exchange began in Chicago. The market is a place for buyers and suppliers to meet and negotiate on the prices of goods that will be supplied on a future date. Not long forecasters saw a big opportunity for making money not as buyers or sellers per se but as predictors of future price rises or falls. It became clear that if any can predict for example, future price rise, he can place a large order at a fixed price which is low, then when the delivery is to be taken he can find another buyer to take the order at the open market price which would of course be higher. This is how the scramble for accurate predictions started; forecasters where using every tool to make accurate guesses at future commodity prices and one of the best tools for making predictions are commodity trading charts

HOW USEFUL ARE COMODITY TRADING CARTS

Given that history repeat itself as is often espoused by traders, it is clear that even without having a good understanding of all the variables that affect  commodity prices, one can still infer from a chart a pattern and can bank on this to make a prediction that can be profitable.

- EASY TO READ

Charts are definitely the easiest tools to use for most commodity speculators as they are easy to read and need little effort t to understand.

- PATERNS ARE EASILY SEEN

Unlike other tools of analyses were calculations have to be made to find the trends, movements, abnormalities, charts present all this clearly enough. Just by looking at the charts you can tell if there are irregularities of factors that need careful study.

- HIGH PREDICTIVE POWER

Because the factors that affect commodity trading are more or less the same in every season, charts showing price movements of these commodities can be relied on to make predictions about future prices.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Start Trading
Follow us in social networks!
Live Chat
Leave feedback