Commodity futures trading is a type of investment where one can make money by speculating on the price of a certain commodity going up or down in the future. Commodities are usually the essential things that people make use of everyday. Most of the times, these commodities are the basic essentials needed by a modern society.
When talking about certain commodities being traded in the commodity market, it must meet specific conditions to make it acceptable for trading. One of the conditions is that the commodity should be homogenized. In trading agricultural and business commodities, the traded commodity should be in its basic raw and unprocessed state. In this situation, Wheat could be traded in the futures market although not flour.
Another condition that a certain commodity has to meet is that the perishable kind should have adequate shelf life. The reason for this is that these commodities are traded with their delivery scheduled deferred at a future time. Therefore, there may require a long shelf life so that the commodities may be delivered with its quality still good and intact. Another condition that a certain commodity should meet is that it should have a price that changes often, creating some uncertainty as well as opportunity to profit.
The history behind commodities trading in commodities developed from the farmer's need to earn more from each crop. Before commodities trading started, the farmers were always in the power of the dealer when talking of pricing and selling their crops. Dealers typically set the costs and the farmers can't to anything apart from accept the terms. In a way the farmers were being exploited by some dealers and so another kind of selling their crop.
In the hunt for having a rather more fair system of engaging in business, farmers commenced offering future crop to interested customers. The farmers started giving their own terms for the future crops to dealers. The exchange is composed of commodities offered as a certain price and to be delivered as a mentioned date. Contracts were then drawn up between the farmer and the interested customer that mentioned the certain quantity of commodity to be delivered at a selected time in future times. From this system, what's now known as commodities trading has started.
It was sometime in 1878 a central dealing facility for such commodities contracts was established in Chicago. In this facility, farmers and dealers commenced at first in spot dealing of their grains that was instantly delivered on a reached settlement in cost. It at last developed into commodities trading when farmers started committing future crops to interested dealers prepared to buy to be certain that their grains supply are maintained in the future.
At the start, commodities trading at first consists only of one or two farm commodities like grains. But later on, a big number of other commodities joined in. Now there are commodities trading markets that deal in valuable metals like gold, silver and platinum. There's also a commodities trading market for stock and cattle as well as for energy products like crude oil and natural gas. It has gone on to incorporate commodities trading in coffee, orange ad industrials like lumber, cotton and even on interest rate bearing instruments like currencies and stocks.
When talking about certain commodities being traded in the commodity market, it must meet specific conditions to make it acceptable for trading. One of the conditions is that the commodity should be homogenized. In trading agricultural and business commodities, the traded commodity should be in its basic raw and unprocessed state. In this situation, Wheat could be traded in the futures market although not flour.
Another condition that a certain commodity has to meet is that the perishable kind should have adequate shelf life. The reason for this is that these commodities are traded with their delivery scheduled deferred at a future time. Therefore, there may require a long shelf life so that the commodities may be delivered with its quality still good and intact. Another condition that a certain commodity should meet is that it should have a price that changes often, creating some uncertainty as well as opportunity to profit.
The history behind commodities trading in commodities developed from the farmer's need to earn more from each crop. Before commodities trading started, the farmers were always in the power of the dealer when talking of pricing and selling their crops. Dealers typically set the costs and the farmers can't to anything apart from accept the terms. In a way the farmers were being exploited by some dealers and so another kind of selling their crop.
In the hunt for having a rather more fair system of engaging in business, farmers commenced offering future crop to interested customers. The farmers started giving their own terms for the future crops to dealers. The exchange is composed of commodities offered as a certain price and to be delivered as a mentioned date. Contracts were then drawn up between the farmer and the interested customer that mentioned the certain quantity of commodity to be delivered at a selected time in future times. From this system, what's now known as commodities trading has started.
It was sometime in 1878 a central dealing facility for such commodities contracts was established in Chicago. In this facility, farmers and dealers commenced at first in spot dealing of their grains that was instantly delivered on a reached settlement in cost. It at last developed into commodities trading when farmers started committing future crops to interested dealers prepared to buy to be certain that their grains supply are maintained in the future.
At the start, commodities trading at first consists only of one or two farm commodities like grains. But later on, a big number of other commodities joined in. Now there are commodities trading markets that deal in valuable metals like gold, silver and platinum. There's also a commodities trading market for stock and cattle as well as for energy products like crude oil and natural gas. It has gone on to incorporate commodities trading in coffee, orange ad industrials like lumber, cotton and even on interest rate bearing instruments like currencies and stocks.
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