Futures commodity trading basics
It's a common sight on the nightly news- a wild crowd of people standing or running about, tightly grouped, who are shouting and waving fistfuls of paper. If you've never had any experience with the futures market, a day on the trading floor can seem confusing.
In this article, you'll learn a bit about the trading of futures, so that you will know exactly what's going on when you see it depicted somewhere.
How does this differ from the way things operated in the 'old days'? Before there were organized grain and commodity markets, farmers would bring their harvested crops to major population centers. There they would search for buyers. There were no storage facilities; and many times the harvest would rot before buyers were found.
They'd set up a stall on the roadside, and sit and wait for someone to buy something. Often, crops would spoil because the farmers had no way to preserve or store them.
Initially, the first organized and central marketplaces were created to provide spot prices for immediate delivery. Shortly thereafter, forward contracts were also established. These 'forwards' were forerunners to the present day futures contract.
Futures prices and the bid and asked price are continuously transmitted throughout the world electronically. Regardless of what geographic location the speculator or hedger is located in, he has the same access to price information as everyone else.
Regardless of the speculator's location, the playing field is leveled because everyone has access to the exact same information. It could be one of your competitors who takes your trade, or another speculator. - 23167
In this article, you'll learn a bit about the trading of futures, so that you will know exactly what's going on when you see it depicted somewhere.
How does this differ from the way things operated in the 'old days'? Before there were organized grain and commodity markets, farmers would bring their harvested crops to major population centers. There they would search for buyers. There were no storage facilities; and many times the harvest would rot before buyers were found.
They'd set up a stall on the roadside, and sit and wait for someone to buy something. Often, crops would spoil because the farmers had no way to preserve or store them.
Initially, the first organized and central marketplaces were created to provide spot prices for immediate delivery. Shortly thereafter, forward contracts were also established. These 'forwards' were forerunners to the present day futures contract.
Futures prices and the bid and asked price are continuously transmitted throughout the world electronically. Regardless of what geographic location the speculator or hedger is located in, he has the same access to price information as everyone else.
Regardless of the speculator's location, the playing field is leveled because everyone has access to the exact same information. It could be one of your competitors who takes your trade, or another speculator. - 23167
posted by X - Men @ 1:31 AM
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