Online Commodity Trading: An Overview

2007-03-08 10:33:40

( Financial )



During the time of our ancestors, trading of commodities used to be done through the barter system. Now, commodities, such as oil, coffee and corn, are traded in mercantile exchanges all over the world.

The inception of the Internet has brought trading of commodities a notch higher. We can now participate in futures trading via the World Wide Web, through the use of electronic trading platforms.

Thus, natural resources and agricultural products are now already being traded even before they are harvested. This is what is commonly known as futures trading.

Mechanics of Online Commodity Trading

In online commodities trading, or any other form of commodities futures trading, we define commodity as something that commands a price and has both an exchange and a use value. The products traded in commodities exchanges, whether online or not, are perishable and greatly affected by several factors, including political scenario and weather.

Investors in futures trading are usually divided into speculators and hedgers. Speculators are investors that earn profit by forecasting or speculating the market trend. Such investors usually acquire commodities in theory, even if they really don’t intend to use them. On the other hand, hedgers are individuals or groups that use the commodities that they buy. The goal of such investors is to maintain the prices of commodities at reasonable levels.

Through online commodities trading, the buying and selling of futures can now be done in the comforts of your own home. There are many commodity brokerage houses that offer web-based trading services at low cost. When you open an account with such Internet trading houses, you can use their platform for online commodity trading.

Advantages of Online Commodities Trading

Fees and commissions can be cut dramatically when trading futures online because you usually do not need the help of a commodity trading broker when trading via the Internet. Thus, investors of online commodity trading can save more compared to conventional traders.

Another benefit of online commodities trading is the ease and speed of the buying and selling of futures contracts. I believe that some trading platforms enable you to trade 24 hours. Thus, it would be very easy for you to take advantage of the rise and fall of the market.


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