Commodity trading

The concept of commodity trading

Commodity exchange is a platform where you can make a deal by means of buying and selling certain products. In most cases, the object of sale in such a market is not a really existing product, but a futures contract. On the commodities market the parties can enclose fixed-term contracts. Derivatives can be prearranged and predicted.

 

The work on the commodity exchange takes place according to two main patterns. You can perform operations with the help of an intermediary or be listed on the exchange as a full-fledged participant. For a rookie investor, the first option is more suitable.

Commodity trading operation aspects

It is problematic to work with an independent financial management in the commodity market. Working through an exchange broker is less risky.

 

Furthermore, the objects of trade on commodity trading market is raw materials and goods, it also has other distinctive characteristics:

A wide range of goods can be purchased at the commodity exchange, from semi-finished products to oil. The trade is not carried out by the product itself, but by a contract for its supply.

Types of transactions on the commodity market

There are two main types of transactions on commodity exchanges:

The deals for real products are divided into cash or spot transactions with immediate delivery and forward transactions with future delivery. Futures deals do not provide for the obligation to supply real goods but involve the purchase and sale of rights to goods.

Futures transactions do not provide for the obligation to supply real goods but involve the purchase and sale of rights to goods. A futures contract can be liquidated either by concluding an opposite transaction with an equal number of products, or by supplying the designated products within the time period the contract calls for. In urgent transactions, the buyer does not expect to receive the values ​​he buys, and the seller does not transfer the values ​​he sells. 

 

The result of such transactions is not the transfer of real goods, but the payment or receipt of the difference between the price of the contract on the day of its conclusion and the price on the day of execution.

Futures operations

Hedging operations

Futures transactions do not provide for the obligation to supply real goods but involve the purchase and sale of rights to goods. A futures contract can be liquidated either by concluding an opposite transaction with an equal number of products, or by supplying the designated products within the time period the contract calls for. In urgent transactions, the buyer does not expect to receive the values ​​he buys, and the seller does not transfer the values ​​he sells. 

Marker grades of oil

Marker grades of oil are classes for which prices are set during trading on international exchanges. Such grades form the cost of other various grades of oil. In the world there are several major marker grades of oil, relevant for different regions, but the following are most significant: Brent, WTI and Dubai Crude.

The main functions of commodity market

Commodity exchanges play an important role. Its main functions include:

Optimization the commodity market using exchange mechanisms.

This sector of the market provides organized trading according to the established rules for all parties Using exchange mechanisms, and specifically speculative actions, it is possible to increase demand for products even if their actual consumption has not increased. 

Stabilization of prices for raw materials and goods.

The commodity market is subject to volatility, fluctuations in real supply and demand for products cause price fluctuations. Speculative operations on are a mechanism of price stabilization, as it smoothes out supply and demand fluctuations.

Securing turnover.

It is operated through trading terminals, uniting sellers and buyers, simplifying and stimulating commodity circulation.

Dispute settlement.

There are certain rules apply to commodity exchange, to which each participant submits. In the event of a conflict, the exchange acts as an arbiter to resolve disputes.

 

The stock exchange activities of the trading entities are regulated by special rules that allow parties to receive additional guarantees. The exchange provides for the participation essentially unlimited number of sellers and buyers of exchange goods.

One of the safest

 

Commodity section on financial market is considered one of the safest one. There are many products to trade and get profit from it.

 

Precisely such way of trading offers ROinvesting broker. It provides you with the best assets and platforms for the sake of its clients. Start your rewarding work with secure tools and reliable broker.