Individuals who are new to trading may find a wide variety of commodities that they can trade like agricultural commodities as well as financial commodities. They may also encounter varied futures contracts that are available for all of the commodities in the market. However, starters need to be able to identify what is suited to them as not all types of commodities are for them. Ebele Kemery says that the new traders have to familiarize themselves first with the financial instruments that are being used in trading. It would be advisable for them to start with one two only as they are still gauging their ability to handle risk and loses in the process.
New traders must see to it that the commodity futures contracts that they are entering into are able to meet basic requirements such as liquidity, high trading volume as well as high activity. They should also select a market where they can practice their techniques and strategies. Since they are risking their money, they have to know precisely the nature of the products that they are dealing with aside from the financial instruments. They may also try practice trading first in order for them to get acquainted with the basic concepts and procedures of commodities trading.
Some of the best commodities that new traders can try include futures on currencies which are liquid and trendy like British Pounds, Swiss Francs and Japanese Yens. Beginners may look into futures on energy products like natural gas and crude oil. However, they must consider the amount of capital that they have as energy commodities are for those with large capital to start with. They may try futures on food products like sugar, coffee or orange instead. These commodities are usually traded in smaller volumes but may be less liquid than other types of raw products that are classified as commodities.
Starters may also trade futures on agricultural products that include cotton, oats, soybeans or corn but they have to be aware of the season and the climate changes that usually affect the regions producing these products. The best types of futures perhaps would be on metal commodities such as gold, silver or copper. Beginners may find these products to be suitable and less risky for them. They have to take into consideration their short term as well as long term financial objectives. New traders also need to take note of the fees that they have to pay, their broker and also the market that they would like to work with.
When commodity trading, look for ways on how you can minimize your risk. You can practice commodity futures trading by paper trading using spreads. This means buying one option and selling another option at the same time. This can also be done using straight futures contracts by buying one futures and selling another.
Ebele Kemery writes about trading energy commodities on the global commodity market, and about factors affecting supply, demand and pricing both now and in the future. Ebele Kemery a Portfolio manager and associated with JPMorgan Investment Management. Ms. Kemery is responsible for formulating our view and investment decisions for major energy commodities including, but not limited to: crude oil, gasoline, heating oil and natural gas.
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