A commodity is defined as goods for which there are demand in a market, but which is supplied without any differentiation in the market. The commodity market is divided in four segments and from it copper from base metals and petroleum from oils are main fluctuating ones copper fluctuates daily based on global supply and demand. So this can be considered as one of the characteristics of a commodity market good is that its price is determined as a function of its market as a whole. In commodity market well-established physical commodities is traded actively in intraday or spot market and other one is derivative market. There is another important class of energy commodities which includes electricity, gas, coal and oil. As commodities were things of value, of uniform quality, that were produced in large quantities by many different producers and the items in commodity market from each different producer were considered equivalent and traded on commodity exchange, it is based on standard stated contract that defines the commodity, not any quality inherent in a specific producer's product. Commodity is mainly traded on a commodity exchange and the list of some main exchanges is as follows:
• Chicago Board of Trade.
• Chicago Mercantile Exchange.
• London Metal Exchange.
• New York Mercantile Exchange.
• Multi Commodity Exchange.
• National commodity Derivative Exchange.
Main points of trading strategies to be laid in commodity market
The commodity market deals with four segments and trading in commodity will surely prove profitable if traded with strategy. Trading strategies to be followed in Commodity market:
1) In commodity market the trader should follow a strategy after checking their risk tolerance, comfort levels, knowledge of the markets. Doing this will clear your mind in case of risk tolerance that up to which amount of loss you can tolerate
2) In commodity trading you can also follow "Trend Following" strategy that most of the professional traders use and recommend. The strategy says that the prices that are in a trend have a higher probability of continuing in that direction. Therefore, the odds should be in your favor by taking trades in the direction of the trend.
3) You also have a choice you can follow "Range Trading" when markets is not in a trend. In commodity markets range trading strategy, you would sell the commodity to market when it gets to the top of its range and buy it from the market when it gets to the bottom of its range. This strategy can work very well for a long period of time, but you have to be careful when the market breaks out of it’s ran. The person who is trading in commodities can use these strategies and can grab profit. But first you need to have some knowledge of market you can also take help of advisors like Ebele Kemery who provide commodity tips over the market.
Ebele Kemery has a decade of experience in Finance, Investment Management, Sales, Trading and Commodities. Ebele is a Member of the Editorial Advisory Board of the Global Commodities Applied Research Digest, and fulltuition scholar from Top tier University possessing a Bachelors of Engineering in Electrical Engineering.
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