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Beginner’s Guide For Trading In Future & Commodities

Are you planning to invest in trading? Well, you have various options before you like bonds, stocks, commodities, futures etc. If you want to invest in the bond of a company, you should always check out that company’s profile on Better Business Bureau. However, new traders are often suggested to start with Futures & Commodities trading as these are comparatively safer than other options. The post below offers a brief on trading Futures & Commodities.

Trading in Futures

Futures contract can be defined as some financial derivative which tracks price of an underlying asset. These contracts are made as agreements in between a seller and buyer who agree to sell or buy that asset at some definite date and price in near future. It’s to note here futures contracts tend to be standardized in both quality and quantity.

Now, it’s to note here most future contracts usually expire without delivery. Most of the contracts are handled in cash only. According to studies, 2% of these contracts are settled physically. It’s mostly because these contracts are traded by the financial speculators. They are mostly interested on making profit from underlying asset’s price changes.

Trading in commodities

Commodities can be defined as basic materials which are utilized for manufacturing refined goods. For example, crude oil, gold etc. Commodities can be interchanged with other commodities from the same family. Commodities are traded in spot as well as future markets. With spot market trading, the commodity trading involves real-time prices. But with futures market trading, a contract is made to sell & buy a particular commodity sometime in the future. Commodity trading is always safer compared to other forms of trading as it offers a strong hedge against market inflation.

When you are new to the trading market, it’s better to start your journey under the guidance of an expert trader or broker.