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Presentation on theme: "Commodities"— Presentation transcript:
A physical or virtual marketplace for buying, selling and trading raw or primary products. For investors' purposes there are currently about 50 major commodity markets worldwide that facilitate investment trade in nearly 100 primary commodities.
Commodities are split into two types: Hard and Soft commodities. Hard commodities are typically natural resources that must be mined or extracted (gold, rubber, oil, etc.)whereas soft commodities are agricultural products or livestock (corn, wheat, coffee, sugar, soybeans, pork, etc.)
There are numerous ways to invest in commodities. An investor can purchase stock in corporations whose business relies on commodities prices, or purchase mutual funds, index funds or exchange-traded funds (ETFs) that have a focus on commodities-related companies. The most direct way of investing in commodities is by buying into a futures contract.
Definition of Commodity Market
Advantages of commodity
futures accomplish on margin, acceptation that to yield a position alone a atom of the absolute amount needs to be accessible in banknote in the trading account
It is a lot cheaper to buy/sell one futures arrangement than to buy/sell the basal
:- The captivation of speculators agency that futures affairs are analytic liquid. However, how aqueous depends on the absolute arrangement getting traded. Electronically traded contracts, such as the e-mini’s tend to be a lot of aqueous admitting the pit traded bolt like corn, orange abstract etc. are not so readily accessible to the retail banker and are added big-ticket to barter in agreement of agency and spread
Ability to go short:- Futures affairs can be awash as calmly as they are bought enabling a charlatan to accumulation from falling markets as able-bodied as ascent ones. There is no ‘uptick rule’ for archetype like there is with stocks.5) No ‘Time Decay’:- Options ache from time adulteration because the afterpiece they appear to accomplishment the beneath time there is for the advantage to appear into the money. commodity futures do not ache from this as they are not anticipating a accurate bang amount at expiry.
Disadvantages of commodity trading
belted sword. Low allowance requirements can animate poor money management, arch to boundless accident taking. Not alone are profits added but so are
Traditionally bolt are pit traded and in adjustment to barter a charlatan would charge to acquaintance a agent by blast to abode the adjustment who again transmits that adjustment to the pit to be executed. Once the barter is abounding the pit banker informs the agent who again
informs his client. This can yield some yield and the accident of slippage occurring can be high. Online futures trading can advice to abate this time by
the applicant with a absolute hotlink to an
You ability acquisition a barter of blah on your doorstep! Actually, a lot of futures affairs are not deliverable and are banknote acclimatized at expiry. However some, like corn, are deliverable although you will get affluence of admonishing and befalling to abutting out a position afore the barter turns up.
Options On Futures
A variety of derivative products based on exchange-traded funds. ETF futures are contracts that represent an agreement to buy (or sell) the underlying ETF shares at an agreed-upon price on or before a specified date in the future. ETF options, on the other hand, are contracts that give the holder the right, but not the obligation, to buy (or sell) the underlying ETF shares at an agreed-upon price on or before a specified date in the future. These products are typically used when you adopt a bullish or bearish outlook on the economy or an industry as a whole, over individual
The advantages of trading futures contracts
1) The commission charges for futures trading are relatively small as compared to other type of investments.
2) Futures contracts are highly leveraged financial instruments which permit achieving greater gains using a limited amount of invested funds.
3) It is possible to open short as well as long positions. Position can be reversed easily.
4) Lead to high liquidity.
The disadvantages of trading futures contracts:
1) Leverage can make trading in futures contracts highly risky for a particular strategy.
2) Futures contract is standardized product and written for fixed amounts and terms.
3) Lower commission costs can encourage a trader to take additional trades and lead to over-trading.
4) It offers only a partial hedge.
5) It is subject to basis risk which is associated with imperfect hedging using futures.
The Advantages of Trading Options
1) Options trading offers flexibility to the buyers as well as to the sellers. It can be used in a wide variety of strategies in order to make a profit from the ever changing market.
2) Financial leverage is another advantage of trading options. Investors can employ considerable leverage without committing to a trade.
3) They are less risky as compared to other types of trading instruments. Huge losses can be avoided as risk is limited to the option premium, so the maximum loss is the price you paid to purchase it (known as premium).
4) Hedging using options enables investors to manage risk and reduce potential risk.
The Disadvantages of Options
1) The cost of trading options can be higher on a percentage basis than trading the underlying stocks.
2) Options are so complex that it requires a close observation and maintenance.
3) The short selling of options is accompanied by unlimited risk.
4) Options will expire at a fixed point in time and lead to most trading expire worthless. This is applied to the traders that purchase
is one of the most effective ways of making money and building wealth. It might seem easy but stock trading can be a risky venture especially for those who are lack of knowledge and experience.
Definition of 'Equity Market'
The market in which shares are issued and traded, either through exchanges or over-the-counter markets. Also known as the stock market, it is one of the most vital areas of a market economy because it gives companies access to capital and investors a slice of ownership in a company with the potential to realize gains based on its future performance.
This market can be split into two main sectors: the primary and secondary market. The primary market is where new issues are first offered. Any subsequent trading takes place in the secondary market
There is a huge potential to make big profits in the stock market. Many investors make a good return by buying the shares at a lower price and then selling them after the price rises.
There is a wide variety of company shares available in the market, anyone with sufficient capital can choose the best one for their investment.
: You can buy and sell shares through an electronic exchange, which is a lot faster than going in person to the stock exchange.
Stocks traded in the market have greater liquidity than other types of securities, which mean you can easily convert company stocks into cash by selling them to other traders in the market. This has made stocks a more attractive investment vehicle for many investors.
There is a risk of uncertainty involved in share trading. If a company goes bankrupt and you bought their stock, your stock may be worthless.
Extra cost for brokerage services:
A traditional brokerage firm will offer a broad range of services but it is often more expensive due to the higher commission structure. And, many brokers charge additional fees for trading penny stocks.
Investors can face huge losses if the value of shares drop dramatically. Many factors can impact the prices of shares, such as natural disaster, negative rumours, profit downgrade, etc. can lead to a fall in share prices.
It is very true that foreign exchange market is one of the most lucrative markets, with high returns on investment. But this requires knowledge, patience and organization. Once you acquire and incorporate all these in your investment behaviour, success will be knocking at your door. Compared with other markets, Forex market has huge advantages in comparison with other type of investment, especially for a beginner or a person with not so much capital. But it can prove as well a huge disappointment in the case of an unprepared person. Let’s have a look at this market’s advantages, but also disadvantages, to help you get prepared for trading
Definition of '
Forex - FX'
The market in which currencies are traded. The
market is the largest, most liquid market in the world with an average traded value that exceeds $1.9 trillion per day and includes all of the currencies in the world.
There is no central marketplace for currency exchange; trade is conducted over the counter. The
market is open 24 hours a day, five days a week and currencies are traded worldwide among the major financial centres of London, New York, Tokyo, Zürich, Frankfurt, Hong Kong, Singapore, Paris and Sydney.
is the largest market in the world in terms of the total cash value traded, and any person, firm or country may participate in this market.
1. Minimal or no commissions - There are no clearing fees, no exchange fees, no government fees and no brokerage fees.
2. Easy access – if you compare the money you need on the market in comparison with the amount needed for entering the stock, options or futures market, it’s a huge difference. The amount of capital is very low and it allows numerous types of people to easily enter the foreign exchange market.
3. No middlemen – spot currency trading is decentralized and eliminates middlemen, allowing you to trade directly.
4. Leverage – with a little investment you can move large amounts of money. Leverage gives the trader the ability to make nice profits and keep risk capital to a minimum.
4. Lots of free courses and demo possibilities – On the internet you can find huge opportunities for learning how the
market works and what you need to become a good trader. Also, most online
brokers offer demo accounts to practice trading and build your skills, using real-time charts and news feeds. They are more valuable than you could even imagine and, before starting your real money on the market, try to see if you are built and ready for it by practicing with these types of software
5. Time and location flexibility – the market is open 24 hours each day, so you don’t have to match your schedule with the one of the market. It doesn’t require a full-time engagement and you can choose the hours that suit your best. Also, you can operate from any corner of the world, as long as you have an Internet connection.
6. Low transaction costs – the transaction cost, determined by the bid/ask spread, is usually less than 0.1%, and it can go even lower in the case of large dealers.
7. A high liquidity market – the market is huge, so is extremely liquid. Around 4 trillion dollars are exchanged every day, according to the latest figures released by the Bank of International Settlements (BIS). That becomes an advantage, as you don’t have to struggle so much until you will find someone who wants to buy your currency or sell you one. You can’t get stuck and, by using features like stop lose, you will close your position automatically, while not even being in front of the computer.
8. No forced deadlines – no one and no rule is forcing you to close a position. You can stay open as long as you consider necessary.
. No fixed lot size requirements – your contract size it’s your decision and you are the only one who determines your own lot.
10. Transparency - due to multi-day market movement, its size and the high number of participants, it is virtually impossible to market manipulation.
1. Differences between retail and wholesale pricing – around two-thirds of the trades are made between dealers and large organizations such as hedge funds and banks. They trade at wholesale prices, while the investor trades at a retail price. Like this it can become a challenge to compete against bigger organization that start with a lower entry point and sell more profitably.
2. Risk of choosing an inexperienced broker – you can find on the internet many people who are targeting fraud so be careful when choosing the broker.
3. Where there is a winner, there is also a looser – don’t expect necessarily to win lots of money. Remember that for someone to get rich, another has to lose money on the
4. Requires knowledge and time – Without completely knowing the market’s rules and without having patience, your investment might very well soon vanish.
When you enter
market, you have to be fully aware of its advantages, but also disadvantages. Don’t count only on the benefits of this investment to think that you will succeed. Study, practice, improve your skills, keep an eye on all the news and factors that influence the market, and always stick to your established system.