Essential Knowledge: Commodity Trading – Futures Market – Spot Market

commodity market

Commodity trading market has first-class history going every part of the way back to the mid 1800s. INDUSTRIAL REVOLUTION bring fresh technologies and abilities to manufacture new resourceful tools and consequently additional food. Economic output begin to out-pace residents enlargement, our country developed a must for more well-organized agricultural storage, transportation and distribution of goods.

As the capacity of goods greater than before exponentially, FUTURES MARKET amid constantly standardized commodity pricing, grading and delivery became an complete requirement in order to deal with the seasonal gluts occurring just after harvest and sharp shortages occurring before harvest. Farmers and investors could now protect themselves from price rise and falls by locking in exact prices for commodities time-consuming earlier than essentially needing to receive physical delivery of them. So the FUTURES MARKET and COMMODITY TRADING was born.

What is Commodity market?

“A commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market. It is fungible, i.e. the same no matter who produces it. Examples are petroleum, notebook paper, milk or copper…”

Specific items values to be well thought-out a COMMODITY and be traded in a futures market. A commodity must be STANDARDIZED. So whether we are discussion about a barrel of oil, a bushel of wheat, a ton of iron ore or a particular importance of foreign currency, commodities have a standardized and set value. This is exactly why such items as art or jewelry is not considered a commodity. Each piece is definitely one of a kind and totally single unto itself. Therefore the value differs and fluctuates massively from one part to one more.

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