Invest in Commodities and Futures

Futures and commodities often go hand-in-hand. A futures contract is a binding agreement that states a seller will sell a commodity to the buyer on a specific date. Commodities come from the earth, and include both hard and soft commodities. Hard commodities are recyclable, soft commodities are consumable. Examples of commodities include oranges, wheat, oil, sugar, precious metals and more. Many professionals and experienced investors utilize some kind of futures trading system to gain an advantage.

These systems analyze the commodity markets and their conditions. There are some different categories of trading for which systems can be helpful and they include long term trading, short term trading and even day trading. Anyone who is a futures trader is a speculator who acts on what they believe is going to happen. A trading system works to technically analyze the commodities market to help the investor make the most educated decision. These systems analyze information like indicators and chart patterns, faster and more efficiently than a person ever could on their own. They also look at aspects like supply and demand, the season and even the weather. This is called fundamental analysis.

For day traders, analysis is performed on a technical basis. This is because day traders buy and sell multiple times a day. Day trading analysis often relies on things like averages, the Fibonacci trading strategy and studies of price ladders and charts. Short term trading may combine both day trading strategies and long term strategies because although the buying and selling periods are short term they are nowhere near as frequent as day trading. Short term traders may execute trades daily, several times a week, weekly, monthly or any similar duration of time.

Long term traders often hold onto their securities for months or years. They use reports based on fundamental analysis, many of which are published each week. These reports contain information on large and commercial speculators and their positions, often in chart form. This allows the long term investor to follow the lead of other investors with large amounts of money.

One type of futures trading system is known as futures spread trading. This entails trading one contract against another contract. These types of trades are less risky than regular futures contracts. Within a market, spreads might include trading a one commodity during numerous months through the seasons. Seasonal trades use the law of supply and demand, as well as the analysis of past data.

Some futures trading systems are automated. They use software with high speed technology to perform algorithmic trading and are commonly used by the biggest investors like hedge fund investors and investment bankers. These programs are so high powered they can execute thousands of trades and make only pennies per trade which still adds up to a big profit. Many believe automated trading makes the markets more liquid. If you are interested in any kind of futures trading systems, speak with a broker. Even with the best system on the market, you should still focus on doing your own research when it comes to investing.