Exposure to real assets can be obtained by trading commodity futures on one of the many global commodity exchanges around the world. The development of the commodity futures contract has a long history and the markets of the 21st century take advantage of the latest trading technologies as many more transactions are now conducted electronically.
You may have a photo of men and women in brightly colored jackets instructing each other on the trading platform, or perhaps a more distant view of exchanging goods on remote computers around the world today, perhaps in an office or even in a bedroom. too much at home. The Internet is so powerful that it can also offer small investors and private traders an electronic trading platform. low brokerage commodity trading Futures mean that a buyer talks about orange juice and the plantation owner never has to meet to do business. Or the cocoa producer in West Africa does not need to know the owner of the chocolate factory who buys futures contracts for the delivery of a few tons of his high-quality cocoa beans.
It is in the nature of goods as fungible assets that they can be traded in this way since they are the same as long as they meet strict quality criteria and are traded under standardized contracts. commodity trading time in India. A commodity futures market defines the criteria by which you accept a commodity for futures trading. Potential buyers who physically deliver the goods from the exchange warehouse can be assured that the product meets quality standards.
For example, if you want to buy Arabica coffee futures, you need to know what the grade or base of the bean is and whether it is trading at a premium or discount on a benchmark coffee. It depends in part on its origins.
The futures contract can be executed electronically on one of the many electronic trading platforms connected to major commodity exchanges or on the exchange floor using the traditional auction method. The basic form of a futures contract is that you must specify a place and date for the physical delivery of the goods in question.
A look at the different raw materials shows the delivery months in which, for example, crude oil is delivered to Cushing, Oklahoma, or in which physical cocoa from West Africa or Latin America is delivered to US ports such as Baltimore, Hampton Roads or New York.
Futures contracts must also clearly state the standard quantity of goods sold or purchased. For example, the standard futures contract for ICE Futures US Robusta Coffee is £ 37,500. best commodity trading broker in India And when you start out in commodity futures trading, you need to be sure of the contract you are trading. For example, if you trade ICE Futures Europe Coal, it will be the Rotterdam or Richards Bay contract. Or if you are in crude oil on the same exchange, are you trading ICE Brent, Middle East Sour, or WTI Light, Sweet?
Payment is an important consideration and must be settled by the close of the business day. See how different it is to trade stocks that settle after three days.An interesting point about commodity futures trading is that the price at which you will sell or buy the commodities at a future date is fixed.commodity exchange in India However, the market price of the actual contract will fluctuate depending on the forces of supply and demand in the market at the time. For example, severe flooding at South Africa's platinum mines could lead to a sudden and sharp rise in platinum futures prices, as shipments are expected to decline in the near future if other factors are expected to decline. keep the same.
Another important aspect of commodity futures trading is the concept of leverage. A commodity trader can control a much larger contract than he can by using 100% of the shares. Trading on margins means that you may only need to set 3-10% of the contract size. In this way, Green India Commodity it is possible to make large profits using derivatives such as commodity futures, but you can also suffer a large capital loss. Let's say you go for long oil at $ 45 and the market falls back to $ 32 a barrel. So you're sitting on a potential loss of $ 13 a barrel, which would equal $ 13,000 on a contract.
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