Futures and Commodity Trading|
Trading Futures consists of traders participating in buying
and selling of commodity/future contracts for delivery on a specified date. The
actual trading occurs through an auction market on the
Chicago Board of Trade (CBOT) where participants correspond with other
futures traders by yelling and hand signals in the futures trading pit. During
geopolitically uncertain times as well as other worldwide events, futures
traders are likely to see a spike in trading volume.
Futures traders or
Futures Day Traders should only participate in Futures Trading with funds
strictly marked as ‘risk capital’ and capital, they can afford to lose and not
miss. Like any other profession, Futures Trading takes a great deal of time to
create a trading strategy that works for the individual trader. Almost all
futures contracts end without actual physical delivery of the commodity.
Futures market prices depend on a continuous flow of
information from around the world and require a high amount of transparency.
Factors such as weather, war, debt default, refugee displacement, land
reclamation and deforestation can all have a major effect on supply and demand
thus, as a result, the present and future price of a commodity. This information
as well as the way people view the information creates a constantly changing
environment for commodity prices - a process known as price discovery.
Aside from futures trading capital that is discretionary to
the individual, discipline is the key ingredient to successful futures trading.
When participating in
trading futures, the individual must be prepared to lose most if not all of
their trading capital. This is usually a result of failure to utilize discipline
while futures trading. Just as with any profession, the individual looking to
start trading the futures market should practice trading, without any capital
risk, for several months, if not longer. The purpose of practicing is quite
evident – it gives the individual a chance to trade without the financial risk.
The CBOT was established in 1848 and offers trading of:
Agricultural futures contracts: Live Cattle, Feeder Cattle, Soybeans,
Soybean Oil, Soybean Meal, Wheat, Corn and Lean Hogs as well as other grains,
oilseeds and dairy.
Energy futures contracts: Light Sweet Crude Oil, Natural Gas, RBOB Gasoline,
Heating Oil, E-Mini Light Sweet Crude, E-Mini Natural Gas and Ethanol.
Equities futures contracts: E-Mini S&P 500 (ES); NASDAQ-100 (ND), E-Mini Dow
(YM), Nikkei 225 (Yen) (NIY), Nikkei 225 (Dollar) (NKD), E-Mini NASDAQ (NQ) AND
S&P 500 (SP).
Metals futures contracts: Gold (GC), Silver (SI), Platinum (PL), Palladium
(PA), Copper (HG), E-mini Gold (MGC) and HR US Steel Coil (HR).
Interest Rate futures contracts: Eurodollar, TIBOR, OIS, U.S. Treasury
Bonds, U.S. Treasury Notes, and T-Bonds.
FX G10 Currency Pairs and FX VolContracts.