Commodities trading is a regulated commodities exchange, where buyers and sellers make standardized contracts. The commodities market can be divided into four categories, which are; Metals, Energy, Livestock and Meat, and Agricultural. The commodities markets are used by many industries as a hedge against volatile prices. As an investor, if you stock pick companies and purchase shares in them, you can hedge against them at the same time. If you buy shares in an agricultural company that produces wheat, you would at the same time place a bid on the stock. This will be like insurance in case the share price declines.
Many farmers and cooperatives use hedging to protect themselves from the volatility, otherwise they could go bankrupt. The commodities markets are used by many manufacturers as a way to budget and normalize expenses through forward contracts. Commodities trading will require you to find a broker before you can trade. Just like on the stock market today, most trading is done online, the same as you would buy or sell stock picks on the markets. Finding a commodities broker will be your first step. There are many brokers to choose from. You will need to see which one offers the best services for the best price.
Because the commodities are highly leveraged, you could find yourself losing more than you invested. For this reason, when you are opening up an account with the commodities broker, he will ask you for details on your income, net worth and credit worthiness. Not everyone can open a commodities trading account as the brokers will decide about your risk level and may reject your application. The Higher your income, trading experience and credit rating, the more likely it will be that you are accepted. Once your account is opened, you can start working with your broker. He will provide you with advice and stock tips, while providing technical analysis on the future price movements.
If however you are using a low commission broker, make sure that you have a good tools for trading. It is also crucial that you have quotes, analysis tools, charts and order entry as part of the trading platform tools. You will need to do your own chart analysis and learn how to trade on your own. You can get a stock market video or tutorials on commodities trading to help you get ahead.