Futures commodity trading basics
Many people see pictures of the large crowd of traders standing in a crowd yelling and signaling with their hands, holding pieces of paper, and writing frantically. To the outsider, it looks like chaos. But do you really think that there's chaos going on in the world's futures pits?
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.
Today's futures trading floor is much different than it was when it first began quite a long time ago. They'd set up a stall on the roadside, and sit and wait for someone to buy something. Often, their crops would spoil because the farmers had no way to preserve or store them.
Also, because many farmers would bring their crops to market at the same time, the price of the crops or commodities would be driven down. There was tremendous supply in relation to demand. The reverse was true in the spring. Many times there would be a shortage of crops and commodities and the price would rise sharply. There was no organized or central marketplace where competitive bidding could take place.
Up until now, there wasn't a way for people to easily place bids on commodities. Then, the market started using "forward contracts", and these contracts were a forerunner to the commodity futures market we know today.
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.
Farmers, bankers, manufacturers, corporations, all have equal access. All they have to do is call their broker and arrange for the purchase or sale of a futures contract. The person who takes the opposite side of your trade may be a competitor who has a different outlook on the future price, it may be a floor broker, or it could be a speculator. - 23200
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.
Today's futures trading floor is much different than it was when it first began quite a long time ago. They'd set up a stall on the roadside, and sit and wait for someone to buy something. Often, their crops would spoil because the farmers had no way to preserve or store them.
Also, because many farmers would bring their crops to market at the same time, the price of the crops or commodities would be driven down. There was tremendous supply in relation to demand. The reverse was true in the spring. Many times there would be a shortage of crops and commodities and the price would rise sharply. There was no organized or central marketplace where competitive bidding could take place.
Up until now, there wasn't a way for people to easily place bids on commodities. Then, the market started using "forward contracts", and these contracts were a forerunner to the commodity futures market we know today.
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.
Farmers, bankers, manufacturers, corporations, all have equal access. All they have to do is call their broker and arrange for the purchase or sale of a futures contract. The person who takes the opposite side of your trade may be a competitor who has a different outlook on the future price, it may be a floor broker, or it could be a speculator. - 23200
posted by X - Men @ 4:09 AM
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