Futures Trading

The Difference Between Trading Stocks And Trading Commodities

February 4, 2012

Many people are unsure about the difference between trading stocks and trading commodities futures contracts, sometimes even those who are already trading in stocks. There is a lot more information that is readily available concerning stocks. The evening news will even report on the stock market and occasionally mention specific stocks; but of commodities, seldom is anything mentioned.

What Are Stocks?

To begin with, a stock purchase represents a share in a company. When you buy stock you are literally buying ownership in the business. A person that owns five percent of the stock will have ownership of five percent of the company. If you increase the percentage of shares to ten percent, you will then own ten percent of the company.

What Are Futures Contracts?

When you trade commodities, you are buying and selling futures contracts based on tangible assets. You are buying and selling future delivery of physical items such as soy beans, corn, cotton, gold, and silver. There are a wide range of commodities that are traded in the market. However, the one difference from straight purchase is that you are buying contracts for future delivery. Naturally investors do not take delivery on these contracts, but buy and sell them before the contract date in the hopes of making money.

Margin and Leverage

Another difference between trading stocks and trading commodities
is how they are traded.

With stocks, you can pay full price or purchase the stocks on margin. When you buy on margin you are borrowing to make a purchase, using stock as collateral. A simple example is you purchase a stock for $10, then use this stock as collateral to borrow $10 to buy another share. This represents 50% margin.

With commodities you can trade on 5% to 15% margins. For example, with a full Corn Contract, you gain or lose $50 for every 1c in price move. This means that you can lose money very quickly, but also make money very quickly. Trading commodities  can be very volatile and very seldom can you invest and walk away for a long period of time as you can with stocks.

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Most Indicators Signify Higher Copper Prices

January 22, 2012

For the trader who focuses on financial markets copper futures are considered an accurate indicator of economic growth. The elasticity in the demand of copper is generally gauges the growth or decline of an economy. Copper futures usually identify growing or shrinking economies and the investor can determine the stocks and options to invest in.

NYMEX High Grade Copper Looks Bullish

Technical Analysis of Copper shows the the fast moving average is above the slow moving average, and indicates that the copper prices are on the rise. The views for both the long term and short term are bullish. As of now the Bollinger Bands indicate the market is overbought and likely to remain so in the near future. The RSI is also in the neutral territory. A good sign to start selling copper would be when the RSI indicator rises above the top line of the overbought zone.  Watch for other technical indicators before taking any bearish positions.

Weekly Copper

The market is extremely bullish
and most indicators signify
higher Copper prices.

The fast average is significantly higher than the slow average and is on a upward slope from the previous line. The slow average is also bound upwards from its previous position and the biggest indicator of Copper price rising is that the Copper price is above both the fast moving and slow moving average.

About Copper As An Industrial Metal

Copper is industrial metal primarily used electrical equipment because of its excellent qualities in the conduction of electricity. Rampantly used in the construction industry because of its natural resistance to corrosion it is an automatic choice for all types of wires (electrical, plumbing and communication).

Where Is Copper Traded

Similar to Gold, the two main markets for copper trading is New York and London. The London Metal Exchange (LME) is the world’s chief non-ferrous based metal markets and the hub of physical copper trading.

World’s Top Producers of Copper

The world produces about 1.5 million metric tons of copper annually. Chile accounts for one third of the worlds copper production. And coupled with The USA they produce 65% of the worlds copper. Scrap Metal and equipment is also a significant source of copper where the metal is taken out refined and recycled for further use.

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My Odd Fetish With Grains

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Technical Analysis Works

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Lumber Futures Prices – looking bullish.

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Learn why silver is more exciting than gold.

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Bullish Review of Monthly, Weekly and Daily Corn Prices

This is my first time playing with screenr and I’m going to talk about corn prices. It looks to me, from all of my meager experience, that corn prices are building to go higher. I haven’t been looking at the weather or the fundamentals, I’ve only been looking at the technical indicators by reviewing the [...]

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