Day Trading Futures

A commodity investment is an  scheme where many individual investors combine their moneys and trade in futures contracts as a single entity in order to gain leverage. They are analogous to mutual funds wherein a fund is similarly set up expressly for trading in equity, except that mutual funds are open to public subscription whereas commodity pool and hedge funds are private.

Commodity market deal in the trade of commodities like gold, cotton, crude oil, orange juice etc. Many items both perishable non perishable, finished goods, raw materials and semi finished goods will be traded in this market at the international level. Commodity market does not necessarily require you to buy or sell the commodities but you can even exchange them.
 
Commodity tips was initially received well only by a few sectors.

Commodities investing were first restricted to the trade and exchange of commodities meant for regular and day to day use. However the awareness in the subsequent stages has brought all sectors into the manifold of commodity investing and has enabled speedy movements, transfer and transaction of goods and services.

It covers physical product (food, metals, electricity) markets but not the ways that services, including those of governments, nor investment, nor debt, can be seen as a commodity.

Commodity enthusiasts, on the other hand, would argue that it is better to own futures contracts than to own shares of companies that produce commodities. Reason: They expect commodity-price inflation. Periods of price inflation tend to hurt equity valuations, so you won’t get the full benefit of rising commodity prices by investing in the companies that produce them.

The group started the Citi BRIC Commodities Index, a gauge of raw materials based on consumption by Brazil, Russia, India and China, a year ago. The index returned about 19 percent to investors this year, the most among 52 indexes monitored by Bloomberg News. The Citi CUBES GSCI-Weighted Index, introduced in 2009, gained more than 16 percent and ranked second, beating the Standard & Poor’s GSCI Enhanced Commodity Index.

Each commodity contract requires a different minimum deposit, depending on the broker, and the value of your account will increase or decrease with the value of the contract. If the value of the contract goes down, you will be subject to a margin call and will be required to place more money into your account to keep the position open. Due to the huge amounts of leverage, small price movements can mean huge returns or losses, and a futures account can be wiped out or doubled in a matter of minutes.

The price of a currency moves according to the performance of the country and major trades happening in that country. If a country is a major exporter of a good then everyone else will need to buy the currency for facilitating the trades. The value of currency in this case will appreciate. The demand of that good will move the currency up or down. Many currency pairs move according to certain commodities. By recognizing this indication early, you can make money from the markets. You can use the correlation to your advantage because unlike commodities, commodities trading requires lot of initial capital. On the contrary currency trading requires much less capital even with stringent risk management. So instead of directly trading the commodities, you can trade the currency pairs, which track the commodities.

Trade Oil Indirectly

One prominent commodity correlation is between oil and Canadian dollar.

Canada is one of the largest producers of oil. Canadian dollar is positively correlated with the price of oil. When the oil price rises, the opposite happens. In response to this, the currency pair USD/CAD pair decreases when oil price increases and when oil decreases, USD/CAD increases.

Play Japanese Yen Based on Oil

The other commodity correlation is CAD/JPY. Japan doesn’t produce any oil so it has to import oil for domestic consumption.. Japan is the third largest importer of oil. Japanese Yen is more susceptible to oil because of the dependence of its economy on oil import. When oil price increases lot of Japanese Yen will be traded for Canadian dollar. Consequently CAD/JPY will increase. CAD/JPY will depreciate when oil price decreases. The correlation between this pair and oil is 80%.

Exposure to Gold through Aussie Dollar

Other common commodity correlation is between the gold and Australian dollar. Australia is the leading producer of gold. There is a strong positive correlation between gold and Australian dollar. If gold loses its shine, Australian dollar will also drop. There is a strong correlation between the gold and the Australian dollar. If you track gold, you can trade AUD/USD easily. Because of its geographical location, New Zealand is highly correlated with Australia. The Kiwi economy is strongly tied with the Aussie economy. It reflects in the correlation between the currencies of these countries. Although its correlation with gold is not as tightly as it is with Aussie dollar. But it still stands at respectable figure of 78%.

You can find a close connection between commodities and currencies. But there are instances when these two don’t move in the same direction strongly. Be sure to pay attention to the possible diversion when you wish to play this correlation. If it shows the convergence, you can go on with the trade.

The strength of commodity correlation will take you one step ahead of the masses. It is he, who has the advantage of information makes money in the market. Trading solely on the basis of this correlation carries a significant risk. But this correlation will give you the confidence to jump in the trade. The correlation can be treated as a supplementary to your analysis.

If you’ve tried trading futures trading, many of the conservative techniques explained show you how to trade with the trend. Another aspect of conservative commodity trading, is commodity spread trading.

In order to delve into commodity spread trading, you need to understand the basics of trading futures without spreads. Let’s take a look at how this is done and understood by the commodity trading community.

The basis of trading straight futures is to profit either from the market moving higher or lower depending on the initial position that you entered. If your purpose was to buy or go long a certain futures contract, your directional bias would be up. If your purpose was to initiate a position that you foreseen the markets moving lower, than your directional bias for market pricing would be to move lower.

Without confusing the new trader, let’s just stick to the terms long and short.

If you are long, than the directional bias is for the market to move higher in price from one’s entry point. If you are short than the directional bias is for the market to lower in price from one’s entry point.

Commodities also trade in different contract months, years and exchanges which allows the savvy commodity spread trader to take advantage of price disparities between these platforms to allow to make money in a conservative manner.

The commodity spread trader does not make money with a specific directional bias as pointed out in the explanations above, but makes money from the difference between two commodity contracts from either a different month, a different year or a different exchange.

For instance, July 2009 Corn could be trading at 2.02 cents per bushel and the Dec.

2009 Corn contract could be trading at 2.30 cents a bushel. I could utilize the difference in prices of these two contract months and profit if that price disparity widens.

Why are two same commodities priced differently?

Well, if the current month was March of 2009, the July contract would be closer to expiration and would than go to market based on the ending price of that contract, while the Dec. 2009 contract has many months to go.

In that time, there could be floods, storms, droughts, and over abundance or an under abundance of corn in the coming months. Also since delivery is further out in comparison from the July Corn contract, there is an added premium of storage that is involved with contracts set to expire further out.

Another analysis a commodity spread investor may take into consideration is seasonal adjustments. July Corn typically rises as the contract comes to expiration while Dec. corn typically falls as it gets closer to expiration.

Taking the seasonal price movement in these seasonally adjusted commodities, you can profit by taking the spread of the two commodity contracts and profit from it. Many savvy, patient and calculated spread traders wait for ideal situations that the market presents and then takes advantage of these disparities.

There are many spreads that you can look for in different commodities such as crude oil, soybeans cattle and currencies. In fact, the Forex marketplace is probably one of the more well known spread trading markets in the world as Forex gains in popularity.

If you look at currency pairs, you will see the price is a reflection of the difference from two different world currencies that create a new price for the Forex market. To prove that, take a look at the Japanese Yen, the U.S. Dollar, the British Pound and see how they trade individually on the CME exchange and than compare the prices it sets in the in the Forex marketplace. Prices are different because in the Forex marketplace prices are represented by the spread between two world currencies.

In closing, at first blush, it would seem that commodity spread trading takes more time for trades to develop, is more complex in structure and takes more time to understand the metrics on how you can profit trading futures spreads. But if you can have patience and study how pricing differentiates from different futures trading contracts in different months, years and exchanges, you can create steady, long lasting profits by trading spreads using futures and commodities traded contracts.

Futures trading is now a 24 hour, seven days a week enterprise, and undoubtedly the main reason you are researching it.  Like all financial instruments, the futures market is highly regulated, but not by the SEC. From crops such as corn or wheat, to oil, gold, and currency, commodities get traded on the futures market. Rice was undoubtedly the very first commodity traded at the original market of the Chinese. Here in the U.S. it began more than 150 years ago at the Chicago Board of Trade with the first agricultural futures contract. In 1982 options on futures was introduced, and in the 1990′s exchanges introduced electronic trading. In today’s market, because of  automated software platforms  traders cannot only compete with the pros, they can use these robots 24 hours a day. With limited exceptions, the trading of futures must be executed on the floor of a commodity exchange.

Similar to broker-dealers that are members of the National Association of Securities Dealers, Inc. or some other self-regulatory organization, all firms and individuals who trade futures with the public or give advice about futures trading must be registered with the National Futures Association (NFA).

Since most individual traders are speculators, here is a list of some of the advantages and disadvantages of the futures market over other investment possibilities.

1. The possibilities exist that a person can make more money faster in the futures market, because  the speed of prices tend to change faster than stocks. Conversely, bad judgment can cause one to suffer greater losses than traditional investments.

2. Futures are highly leveraged investments. The trader only puts up about 15-20% as a margin, yet still being able to ride the full amount of the contract. Unlike stocks where at least 50% of its value has to be put up, and the investor pays interest on the difference between the margin and the full contract value.

3. For the most part there is no inside trading. Everyone has the same insider’s information on the weather, for example. This is an open outcry market, very public, which insures a fair outcome.

4. Commission charges on futures trades are small compared to other investments, and the investor pays them after the position is liquidated.

5. Most commodity markets are very broad and liquid. Transactions can be completed quickly, lowering the risk of adverse market moves between the time of the decision to trade and the trade’s execution.

Futures Software

Let us assume that you have some knowledge or you wouldn’t be researching the market. Any training you receive should be for technical analysis, or you are just wasting time and money. As far as software platforms, the following suggestions I strongly feel are necessary for any software to be useful.

1. It must be able to offer live streaming technical data. (Otherwise the program is merely educational)   
2. The platform should defiantly include candlestick charting.
3. Visually it has to be large enough for all the data to be seen easily. (Many of the online brokerage’s technical data are too small to be useful)
4. It must be cost effective. (Most good systems can be purchased for between one and two hundred dollars)

These are just a few ideas for tools that you can utilize to increase your chances for success. I don’t profess to being an expert, but I do know of some. I obviously don’t have the time to go into all the details now, but at my site  Market Mentalist you will find all you need to know about investing online. There is access to some of the top trading systems available including state of the art  software, books, newsletters, and Forums. Also you will find the most up to date articles on Online Trading, including additional information on Commodity Online Trading…Commodities in Your Future . Whether you are an inquisitive novice or a seasoned pro Market Mentalist offers the online investment resource you just might be seeking

TrackNTrade.com – Specializes in providing the latest developments in futures, forex and stocks trading software. Visit this website today and know how to trade commodities like gold, crude oil, and livestock from home.

Commodity Trading is often described as commodities and futures. These can be generic terms to describe the markets. It is no difference to the way stocks and equities are utilizes when investors discus stock market. Specifically, what they mean is that commodities are the actual physical products like gold, crude, corn, oil and many more. On the other hand, futures are contracts of commodities that are traded at a future exchange. Future contracts have extended beyond just commodities. Presently, there are future contracts on the financial markets like the t-notes, currencies and many more.
Futures are uniform contracts among buyers and sellers of commodities that stipulate the amount of a commodity, quality/grade and delivery location. Commodity trading coupled with futures contracts takes place at a future exchange, and similar to the stock market, it is entirely anonymous.

Different Types of Players in Commodity Trading Markets:

Small Speculators. Individual commodity traders who trade using their very own accounts or through a commodity broker. Both small and large speculators are known for their capability to stir the commodity market.
Large Speculators. A group of investigators that pool their cash together to lessen the risk and increase gain. Similar to mutual funds in the stock market, large speculators have money managers that create investment decisions for the investors as a whole.
Commercials. The individuals involved in the production, processing or merchandising of a commodity. For instance, the corn farmer and Kellogg’s are commercials. This kind of commodity trading accounts for most of the trading in the commodity market.

How to Begin Commodity Trading

Before you start trading commodities, it is important to educate yourself on the futures contract specifications for each commodity and learn about the different trading strategies. Commodities have the same premise like any other investment – you want to buy in a lower price but sell it in a much higher price to gain profit. The difference with commodities is that they are very much leveraged and they trade in contract sizes rather than in shares. Bear in mind that you can buy and sell positions at any given time when the markets are open, so be assured that you don’t have to take delivery of a truckload of corn.

Managing Your Own Commodity Trading Account

The two major factors to consider when you are deciding to manage your own account or invest in a managed futures fund are time and experience.
Numerous investors work full time jobs and could not commit the time it takes to appropriately manage a commodity trading account. It can be very time consuming to manage commodity trades most especially if you want to do short-term trading. The futures markets are more leveraged compared to stocks, so a hands-on approach is necessary.
You must question yourself honestly if you have the capability to commit your time in the trade. Further, you must also ask yourself if trades will be a disruption in your normal life. It can take anywhere from a couple of hours a week to eight hours each day in order to manage an account, depending on your trading style. It normally does not make sense to put your full time job at risk to manage a commodities account that is only a small part of your overall investment portfolio.

The opportunity costs that are involved in managing a commodity trading account is also a concern. Could you create extra income in the long run by devoting more time to your job? Or, would you prefer spending your extra time with your family and friends? You should evaluate these considerations on whether it makes sense to invest in a managed futures account or you want to do it yourself.

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Futures trading is now a 24 hour, seven days a week enterprise, and undoubtedly the main reason you are researching it.  Like all financial instruments, the futures market is highly regulated, but not by the SEC. From crops such as corn or wheat, to oil, gold, and currency, commodities get traded on the futures market. Rice was undoubtedly the very first commodity traded at the original market of the Chinese. Here in the U.S. it began more than 150 years ago at the Chicago Board of Trade with the first agricultural futures contract. In 1982 options on futures was introduced, and in the 1990′s exchanges introduced electronic trading. In today’s market, because of  automated software platforms  traders cannot only compete with the pros, they can use these robots 24 hours a day. With limited exceptions, the trading of futures must be executed on the floor of a commodity exchange.

Similar to broker-dealers that are members of the National Association of Securities Dealers, Inc. or some other self-regulatory organization, all firms and individuals who trade futures with the public or give advice about futures trading must be registered with the National Futures Association (NFA).

Since most individual traders are speculators, here is a list of some of the advantages and disadvantages of the futures market over other investment possibilities.

1. The possibilities exist that a person can make more money faster in the futures market, because  the speed of prices tend to change faster than stocks. Conversely, bad judgment can cause one to suffer greater losses than traditional investments.

2. Futures are highly leveraged investments. The trader only puts up about 15-20% as a margin, yet still being able to ride the full amount of the contract. Unlike stocks where at least 50% of its value has to be put up, and the investor pays interest on the difference between the margin and the full contract value.

3. For the most part there is no inside trading. Everyone has the same insider’s information on the weather, for example. This is an open outcry market, very public, which insures a fair outcome.

4. Commission charges on futures trades are small compared to other investments, and the investor pays them after the position is liquidated.

5. Most commodity markets are very broad and liquid. Transactions can be completed quickly, lowering the risk of adverse market moves between the time of the decision to trade and the trade’s execution.

Futures Software

Let us assume that you have some knowledge or you wouldn’t be researching the market. Any training you receive should be for technical analysis, or you are just wasting time and money. As far as software platforms, the following suggestions I strongly feel are necessary for any software to be useful.

1. It must be able to offer live streaming technical data. (Otherwise the program is merely educational)   
2. The platform should defiantly include candlestick charting.
3. Visually it has to be large enough for all the data to be seen easily. (Many of the online brokerage’s technical data are too small to be useful)
4. It must be cost effective. (Most good systems can be purchased for between one and two hundred dollars)

These are just a few ideas for tools that you can utilize to increase your chances for success. I don’t profess to being an expert, but I do know of some. I obviously don’t have the time to go into all the details now, but at my site  Market Mentalist you will find all you need to know about investing online. There is access to some of the top trading systems available including state of the art  software, books, newsletters, and Forums. Also you will find the most up to date articles on Online Trading, including additional information on Commodity Online Trading…Commodities in Your Future . Whether you are an inquisitive novice or a seasoned pro Market Mentalist offers the online investment resource you just might be seeking

Attraction

If you are looking to diversify your portfolio with something other than bonds, shares, real estate, then the commodity market can provide just the opportunity you are looking for. With the Indian economy opening up and the establishment of multi commodity exchanges, retail investors now have the chance to trade in commodity futures which has nothing to do with actual physical stocks. Commodity trading offers immense potential for the creation of a distinct asset class in the market that savvy speculators and investors can take advantage of. Commodity market is relatively easy to understand and the pricing here is more stable compared to the volatility of equity and bond market, thus paving the way for effective portfolio diversification. The commodity trading market plays a vital role for risk sharing and information pooling in the sector and facilitates mediations between sellers and buyers.

The underlying market is made more liquid because of this.

Commodity Trading

Commodities can be traded on 3 platforms – the Multi Commodity Exchange of India Limited (handles futures trading of many commodities), the National Commodity and Derivative Exchange (handles energy, metal and agricultural commodities) and the National Multi Commodity Exchange of India Limited (handles mainly agricultural and metals commodities). Electronic trading and settlement is possible on all 3 systems. You can start trading with an amount as small as Rs5000. You need money to pay upfront for the margins during exchange through brokers, with margins usually ranging from 5-10% of the total value of the contract. You need a bank account as well as commodities demat account registered with the national Securities Depository Limited to start commodity trading.

Collecting Information

You can get relevant information and news from daily business newspapers. You can also check out specialized metals and agricultural commodities magazines. Brokers too provide analysis as well as research support. You can make use of the internet to look for specific information.

To know more about Clearing Services, kindly visit:

http://www.smcindiaonline.com/commodities-trading.aspx

ou may strike gold once or twice through pure blind luck, or even by mindlessly following the crowd. But without a reliable system of calculating potential price reversal points, you’re exposing yourself to a much larger amount of trading risk than necessary.
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When I first started trading 12 years ago, I worked for one of the largest grain trading companies in the world. I was directly responsible for placing their futures orders, which meant I had to devote myself to an intensive technical analysis of market trends.

In other words, I needed a highly accurate way of knowing when and how markets will react.

The more I studied, the more I became interested in the techniques used to “trade price and time”. You see, most traders are only aware of calculating potential reversal points using price, but few trade when price and time meet.

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Whether you have your own preferred methods of technical analysis or are still searching for the right one, trading by price and time will be a much treasured weapon in your arsenal.
As a trader who has been studying the markets since 1993, I definitely know what I’m doing when it comes to stocks and commodities. In fact, I even run a mailing list for over 5,000 subscribers, dispensing useful advice on trading and techniques.

Now if you get your hands on a copy of my Price And Time trading software, you’ll also receive a concise, 25 page handbook that explains the fundamentals of Fibonacci and Gann trading.

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