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Introduction to commodities

Although commodities is a funny sounding name and many people think it may be a fungus or a disease, it is fact a way to make some serious money. That is, if you understand commodities and know how to invest in the market. To get started, find out what commodities are, the types of commodities and a little about trading commodities.

Overview of commodities

It is possible to trade commodities anywhere in the world including the UK and the United States. Traditionally, trading occurs at commodity exchanges using floor traders, commodity broker firms or through several discount commodity brokers using the Internet.

What are commodities?

Commodities are currencies and raw materials, which can be traded on market future exchanges using a variety of brokers.

Types of commodities

Commodities are not a form of fungus, but are things that people need and use every day. Basic commodities can be broken down into the following classifications:

Agricultural commodities: The agricultural commodities classification contains many raw materials such as corn, beef, wheat, pork bellies, potatoes, timber, lumber, cocoa, frozen orange juice, coffee and more.

Metal commodities: Market exchanges also deal in metal commodities such as copper, iron ore, silver and gold in addition to a variety of other commodities including currency and those with no classification.

Commodities

Commodities futures trading is accomplished when a person speculates on the price of currency or raw materials and whether the price of the commodity will rise or drop in the future.

The goal of buying commodities is to buy commodity futures at the lowest price possible and sell at the highest price. Your profit is the difference between the two.

Trading commodities

Today, commodities are traded using speculative paper investing. No one actually holds hundreds of pounds of pork bellies or thousands of orange juice cans. When trading, investors receive a paper called a futures contract.

Contracts may be for a set period of time and can be held for as little as a few minutes or months, hence the name day traders.

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