Commodity Tips – The Basics of Futures Market Trading

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A standardized agreement set by an exacting futures exchange that consist of the size (1000 barrels, 5000, 5000 ounces, bushels etc.), The place, where liberation can be made, the type & quality of the whole commodity to be received, and the rate of the transaction.

The futures agreement is negotiated on rules & regulated futures exchange, which is a main market place, where all trade orders are routed to a particular location on the commodity exchange.

A transaction in the commodity futures marketplace is made in the buying and selling floor (or in the online trading computers) of the commodity exchange between brokers/adviser who is the members of the exchange, that can provide all type of tips like Commodity Tips Nifty Tips, that exacting commodity is dealing in. The buyer & seller will have a broker. They will then manage an order for a buy and sell.

The traders of the commodity futures contracts have compulsions. The purchaser is obligated to get delivery and pay for the hard cash commodity during an exact time frame. The supplier is obligated to receive the commodity, for which he will be paid the rate that was decided by the commodity exchange pit by the all the brokers. (Sometimes the rate can be less or more depending on the quality of the specific material.) The trader can eliminate their compulsion by offsetting their buy & sell on the exchange previous to the contract comes due. This is what mainly speculators do in the commodities markets.

Speculators:

There are speculators & hedgers that buy and sell in the commodity markets. (A hedger is not involved in making earnings of the movements in the rate of a commodity future agreement, but rather in the shifting, his peril of the loss of the commodities itself due to adverse rate change.) Speculators will trade futures, or options on futures, for the reason of building a profit. They will purchase futures (a long position) when they believe prices will increase, or they will find futures (a short position) when they believe prices will decrease. Both the speculators and hedgers put in volume in a market building it a more liquid marketplace to trade.

Most of the individuals who open new commodity trading accounts are speculators seeing to advantage off of the rate movement of the commodities being traded. Farmers, cattle companies, oil operators it could open a commodity futures buying and selling account seeing to be a hedger and decrease their risk of rate movement.

Trading:

Here is a very simple example of a pioneer (we will describe him a futures trader) executing a deal and how it would be work. Once the futures market trader has recognized a future dealing account, he would then call his commodity broker to initiate a buy & sell. He would let the adviser or broker know, if he was seeing to buy or sell (long or short), the exact commodity he wishes for the trade in, the month & year of the agreement, he is looking to buy and sell, the quantity, and the rate which he is willing to sell or buy for (or he can say the commodity market order to have the buy and sell executed at the current market rate in the trading pit).

Example: The futures market trader calls his broker or adviser and says “I would like to purchase One March 2015 Corn futures at the current Market Rate.” The adviser or broker would then acquire this futures order and transmit this to the dueling pit on the exchange, where the order would then be completed by the brokers on the flooring. (Sometimes circumstances are present when the buyer and seller cannot be executed for a few reasons which is unusual but can happen.)

After the deal is executed, the market broker would relay rate paid or sold and applicable information and Commodity Tips back to the dealer’s broker. The futures market trader’s broker would then allow the futures trader to identify the price that the purchase or Sell (the trade) was executed.

In current times, more trading has been completed through the use of the online futures trading, removing the use of cellular phones and calling of the brokers on the telephones. Future market investor can trade without delay from their online computer and have the deal routed openly to the trading level of the exchange. At the commodity exchange many others (electronic markets) are completed immediately in the market exchanges computers. This is becoming the extra preferred method of the trading because it tends to be earlier.

Let’s say the futures market trader got his rate back (the fill rate) and he buys one March Corn at 3.10 dollars. He then watches the commodity futures quotes and looks the price trading higher at 3.15 dollars. He then calls his commodity broker (or go into an order into his online trading platform) to vend the future agreement he has bought previously in the day. He tells his adviser or broker “I would like to vend 1 March 2015 Corn at the Marketplace rate.” The broker or adviser then communicates this to the trading pit, where the deal is completed and reported back to the commodity futures trader. Let’s say the rate he received for the sale was 3.14 dollars.

The commodity futures trader bought a Mar Corn for the 3.10 dollars and sold a Mar corn for 3.14 dollars.

One corn agreement is 5000 bushels. Therefore, everybody cent move in the rate of a full volume corn futures contract is 50 dollars.

The variation between the buy & sell was a 4 cent income.

The commodity futures trader experienced an increase of four cents multiplied by 50 dollars, or a 200 dollar move in his favor.

Commissions & fees would be removed from his buy & sell.

Also bear in brain, had the rate fallen, and the commodity futures trader or investors sold the corn at 3.06 dollars, he would have vanished 4 cents, a loss of (200 dollar) plus commissions & fees. And remember the peril of loss exists in the futures trading.

Sometimes traders perform trades huge times a day and for huge quantities.

In Conclusion:

This is just a concise example of how the commodity trading market works. This in no way gives details all the intricacies includes with the trading. Trading commodities is perilous and one must only use risk capital to spend. Please agreement one of our licensed version brokers who can clarify more in detail on how the whole commodity markets work, provide surest MCX Tips, and decide if you are appropriate to trade these speedy paced markets.

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