Some most important attributes of commodities traders.

Posted by Nayna Bhardwaj on February 20th, 2018

Commodity trading is often described by the term “commodities” and “futures” or future trading. By trading commodity futures and options you can make great profit if you have deep knowledge about it. However, huge amount of risk is also associated with it. To avoid the chances of risk commodity traders takes commodity tips. Commodity market is vast, thus complex too because with greater opportunity for profits, there is always a higher potential for losses.

These are the generic terms which are used to describe the market. In future trading the futures prices reflect the price of the underlying physical commodity. Basically, futures are contracts of commodities that are traded at a futures exchange.

Many successful commodities traders have some common attributes in them. The traders who want to involve in the commodity markets then it is very important for them to understand the distinct characteristics of those who succeed.

First you need to understand the fundamentals.

You need to understand how the futures and options work on the exchange because it is very important to understand the fundamentals, supply or demand characteristics of these raw material markets. Once, you understand all these aspects you would be able to trade efficiently.

The economics of commodity market are fundamentals. The fundamental analysts researches the total supply versus total demand in markets at different points in time. The path of least resistance for prices can be lower when the current supplies exceed the current demand. Also, in this scenario, the market tends to be in an oversupplied condition. On the other hand, if the current demand exceeds the current supplies, prices tend to move higher.

Secondly, understand the technical factors.

Technicians use the historical price trends to predict the future trend and by this they study the collective behavior of prices in commodity markets. They also uses a chart or picture of price movements over time. Not all the technicians use same kind of study to analyze the variation in prices. Some look at very short term price data. However, sometimes as short as within a trading day. Whereas, other technicians look at longer-term data like daily, weekly, monthly or more longer to understand price behavior.

Technical analysis is one of the most important component for understanding the current path of least resistance for prices and also for predicting the future because market prices go higher when there are more buyers than the number of sellers and they go lower then sellers over buying. The technicians attempts to identify the price patterns on charts which will cause others in a market to buy or sell.

Along with commodity trading, traders also prefer to trade in intraday market because intraday trading effectively provides quite good returns in one day and it also provides higher leverage. Traders can take intraday tips from some well known providers to earn good profit on your invested capital. Trader trade in intraday trading with the purpose of earning profit on the same day.