If this is the first time you trade, this course will help you understand the basic of the financial market, Indices, Forex and commodities. In this course, you will understand how the market operate and how you can profit from it. So to begin, let's answer the fundamental question: Why do we trade?
Join NowUnlike share, Forex and indices, commodities are not digital good but are natural source in which we extracted from Earth.
These includes (but not limited) gold, oil, sugar and pork.
Commodties are meassure by a standard unit such that traders do not need to consider other factors of the commodity such as its origin and quality. For example, a unit of sugar from China is treated as equivalent as a unit from USA.
Commodities are divided into soft and hard commodities.
Soft commodities mainly refer to argiculture good. As a result, soft commodities are easily affected by nature factors, weather and prodcution and tend to fluctuate alot more.
Hard commodities refer to mined materials. These products tend to be easier to transport and standised.
Commodities can be categorised as follow:
There are two methods for you to trade commodities: Spot and Future
You can trade any commodities, anytime you want with spot as the trade will be executed immediately.
Let's you are an owner of an oil refinery and you are running out of oil for your clients, you can always buy more oil from the market as a last resort.
In another case, if you suddenly realise that you do not have enough sugar for your client, you too can purchase additional sugar from the market.
And since all quality of these products are standised, you do not need to worry about its quality.
Unlike the spot market, futures contracts delay payment and delivery to predetermined future dates. As the trade will not be conduct imediately, the investors will be given a contract for the transaction. And as the investor does not physically owned the commodities, he or she is free to sell or close the position before the determined date.
For example, if you think the price of oil will increase in the future but you do not wish to recieve barrels of oil in your doorstep, then future trading is a good option.
And because of this, future is quite common for investors and funds to hedge their portfolio.
Producers might decided to use future to make sure that they can sell their products at a given price if they worry about certain environment risk.
Investors trade with future usually are not interested in the product itself but rather, wish to profit from the trade.
