Commodity Trading: Basic Facts

Commodities are the best and most reliable products to use as a basis for your trading. commodity trading for beginners pdf The practice of exchanging commodities is so old that it may, in fact, be the very first form of trading. Commodities can be any tangible item that humans value. As such, they will continue to be a vital part of trading as long as humans exist. It could be items that are perishable, like meat and wheat. Items for energy like coal, oil, or natural gas could be included. Gold and silver are examples of items that have less obvious uses.

The History of Commodity Trading

There is obviously quite a disconnect between how commodity trading may have functioned thousands of years ago, and how they function today. This is why we will shortly go over the history of commodity starting in the ancient era.



Trading in commodity trading originally referred to the trading of commodities of equal values without intermediaries (i.e. money). money). This could be grains for gold, or any trade people could think of with the available materials. Monetary exchanges would have started over 6000 years ago, around 4000 BCE. In the ancient world (Mesopotamia, Egypt), people would have traded these items directly. Soon after, monetary exchange systems developed. For example, in Sumer, the townspeople would trade clay tokens for livestock. They developed writing systems in tandem to keep track of their transactions. You could usually see engravings of these information on clay tablets. You could equate these clay tablets with something like the earliest contracts.


Over time, people started to value other commodities. One of the most notable is gold and silver, whose visual appeal made them very popular. People began to adorn themselves in them to display their status. People could easily create any shape from them and adjust their volume. As these items were so valued but did not have much practical use, they slowly found alternative applications. These items were used as a currency, an intermediary for exchange.


As time went on, people still exchanged commodities for other commodities, services, or land. The people would try to estimate the value of commodities by weighing them. Gold and silver were used as alternatives to these traditional commodities.


Modern Trading

By 1530, we approach something close to modern trading, with the founding of the Amsterdam Stock Exchange. The people would have used what we call rudimentary contract for trading goods. Forward contracts, options and short sales are all included. This type of institution spread throughout Europe and then to the United States. From there it continued to develop into the 19th and 20th centuries.



You have two choices in today's world. If you do decide you want to get involved in the commodities market you should keep in mind the types of markets available. The Over the Counter (OTC), and the Exchange Based Market are the two types of markets. OTC markets involve the direct exchanges of goods between two parties, without an intermediary. An Exchange Based market is organized through a clearinghouse for the parties involved, to ensure that a settlement takes place.


Popular Investment Commodities

There are obviously a countless number of commodities worth looking into for trading. To give you an idea of what is available to you, we will give you a short summary of the most popular type of commodities available. They fall into three different categories: energy (metals), agricultural (meats and agricultural), and agricultural.


Agricultural

It includes meat, agricultural products and almost all consumables. It also includes livestock, from which other items such as meat, milk or wool can be derived. The most important of these are as follows:


Grains - Since the start of agriculture, grains have remained a staple for human survival. They are not the healthiest foods, but their relative simplicity allowed them to be produced in large quantities. It has allowed people to survive in times of hunger.