Buying Commodities

Buying Commodities
By
www.CandlestickForums.com

If you are interested in buying
commodities there are a
number of things to do before
opening an online trading
account.


The obvious ones are to
research online trading
software and take an online
trading course such as
Commodity and Futures
Training.


Aspiring traders will also want
to have a fast internet
connection and computer
hardware with the capacity to
handle lots of data in a hurry.


A Windows 2003 server is
typically sufficient.


As a general rule of thumb the
trader will want at least 4 GB
of memory and a dual core 3.2
GHz processor or two Quad-
core 2.6 GHz processors.


Then the system will need two
network cards, one pointed
towards the system and the
other pointed towards the
exchange.


A hard drive with 30GB or
more memory capacity will be
needed to store the software
and log files.


Once the trader has the
hardware set up, the software
installed, and has taken the
first online class the work
starts.


To engage in successful online
commodity trading the trader
needs to develop a trading
strategy for buying
commodities.


A commodity is a thing that is
bought, sold, and, commonly,
consumed.


Buying commodities like corn
futures and oil futures is done
for two reasons.


Producers and processors of
these commodities engage in
hedging in the commodities
markets in order to reduce
investment risk.


Other traders buying
commodities and selling
commodities do so in order to
profit from recurrent
commodity price fluctuations.


Gold futures are different in
that industrial use is a small
aspect of the value of this
precious metal.


Gold prices fluctuate with the
state of the economy and
concerns about inflation.


However, when buying
commodities the trader is
concerned about price.


. How the commodity is used
is only important so far as that
information affects
commodity supply and
demand.


Buying commodities is
profitable in so far as the
trader is able to anticipate
rises in commodity prices.


The trader will buy futures on
the commodity and then sell
once the price has risen.


If the price is likely to head
down then the commodity
trader will want to sell
commodities instead of
buying and then buy when the
price has gone down.


The point of this discussion is that
a commodities trader needs to
learn the fundamental analysis of
the commodity he trades and
needs to use his trading software
to do continual technical analysis
in order to profit.


Developing a commodity
trading system is of utmost
importance which is why a
formal start to learning about
buying commodities is
important.


An alternative to buying
commodities is buying calls or
buying puts on futures
contracts.


Unlike buying commodities,
buying options does not
confer an obligation to buy
the commodity.


The trader buys the right to
either buy or sell the
commodity future in question.


He or she need only exercise
the options contract if the
price moves in the right
direction.


Although the options trader
pays a premium for buying
options he does not lose
money based upon
unexpected price movement
when buying commodities.


Buying Commodities

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Buying Commodities