It’s common knowledge that in trading commodities, like any other kind of speculating, there are no guarantees. You can make money, or lose money - a lot, and quickly. What’s less commonly known by the average trader are the many methods professionals use to reduce the risk of loss and limit the amount.
The most basic [...]

Stocks and bonds aren’t the sort of thing the novice investor typically thinks of as a commodity. Even less do they view a statistical measurement of changes in their prices as similar to gold, wheat or oil. Yet, because stocks and bonds (and the indexes that measure price changes) trade in the form of futures [...]

Fundamental analysis, in essence, comes down to studying the factors affecting supply and demand. When supply is great relative to demand, prices tend to fall. When demand is large relative to supply, the price of a commodity rises. But beyond those simple and obvious principles, there’s a world of complexity. What, after all, affects supply [...]

Investors come in all flavors. Some are bold, whether they have the capital to lose or not. Some are cautious and regard capital preservation, with the hope of some small return over a long period, as the paramount value. Somewhere in between, but closer to the latter probably, is the territory for most fund investors.
Serious, [...]

Let’s examine a highly simplified commodities future contract trade.
Suppose a trader buys a contract to purchase oil trading on NYMEX (The New York Mercantile Exchange) at $70 per barrel for WTI with an expiration date of August 6th. (Oil comes, obviously, from a variety of major sources, including the North Sea near England, Alaska, Saudi [...]

Why aren’t paintings commodities? Because each one is unique. Commodities are uniform and one individual or portion serves the same purpose as any other. An ounce of gold, a barrel of oil, a bushel of wheat. In every case, one is pretty much like another. It makes little difference to most of those buying it [...]

Most commodities trades are executed in the form of futures contracts. A specified percentage of the asset price is paid and a buyer accepts the obligation to deliver (or take delivery of) a set quantity of the good at a future date. Hence the name.
Why do futures offer any advantage over trading the commodity directly? [...]

Suppose you’ve been reading the newspaper lately and seen the substantial rise in inflation over the last two years. You bet, along with many others, that this trend is likely to continue for the next two years. You decide to hedge your portfolio, and possibly pick up some profits, by investing in gold.
Unfortunately, you don’t [...]

Fundamental analysis in commodities trading looks at economic factors such as weather predictions and crop yields, new mines opened, new oil extraction technology, etc. In short, factors affecting the causes of supply and demand.
Technical analysis, by contrast, is based on the idea that trends can be detected by charting mathematical manipulations of a few basic [...]

A large number of common trading strategies are for the purpose not only of making a profit but, as a hedge. Hedging is essentially an attempt to buy some form of insurance to minimize risks. Typically, along with minimizing risks comes a cap on potential profits. Let’s examine one of these strategies: the spread.
Most commodities [...]