Commodity Trading
Commodity trading on the market has its’ roots in the agricultural field. Commodities such as wheat, cattle and corn were traded via an exchange, similar to a store or market, that began in the 19th century.
Some of the most popular commodity trading
today, involves the sugar, coffee and oil industries. However, almost
any consumable product is bought and sold on a commodities market.Most
commodity trading are done on futures markets. Commodities markets have
agreed upon standards that a product should meet and the commodities are
bought and sold on that basis.
Some deals though are made
on the spot and are therefore called spot trades. The deal is that the
delivery is made immediately or soon after the agreement is sealed. It
usually involves an actual visual inspection of the shipment or at least
a viewing of a sample of what will be sent. This is a common type of
trading deal in the wholesale markets.
Most speculators trade futures markets,
whereas people actually want physical delivery of the commodities (such
as farmers, trade spot markets).
Oil is a special commodity.
Unlike most other commodities, oil prices fluctuate drastically. They
are also heavily tied to national politics in countries around the
world. Most of the world still needs oil to run vehicles and most of the
oil comes from specific regions within the world.
Whenever there is political upheaval, such as
when Saddam Hussein was captured, prices rise dramatically because there
is uncertainty as to how much oil will be transported. It takes a long
time for oil to reach the shores of continents like Australia and North
America. This increases prices and any delays and instability in the
market will reflect an even greater increase in price.
Some commodities trading exchanges specialize
in just one industry. For example, the Buan Ma Thuot Coffee Exchange is
the only type of commodities trading market they have in Vietnam. The
London Metal Exchange specializes in metals and plastics for large
industries.
Commodities trading has also taken to the
internet and can be done via brokers, or spreadbetting websites. This
type of commodities trading is set up differently than traditional
markets.
Commodity trading