Futures commodity trading and what it entails
It's a common sight on the nightly news- a wild crowd of people standing packed in like sardines, who are shouting and gesturing wildly. For those who aren't familiar with the business, it can look pretty intimidating. But, those who know the futures market are fully aware of the methods behind the madness.
Actually, everyone in the crowd knows exactly what's happening. It's almost like another language. Learn that language and you'll also know what is going on.
How does this differ from the way things operated in the 'old days'? Before there were organized grain and commodity markets, farmers would bring their harvested crops to major population centers. There they would search for buyers. There were no storage facilities; and many times the harvest would rot before buyers were found.
They'd set up a stall on the roadside, and sit and wait for someone to buy something. Often, crops would spoil because the farmers had no way to preserve or store them.
Initially, the first organized and central marketplaces were created to provide spot prices for immediate delivery. Shortly thereafter, forward contracts were also established. These 'forwards' were forerunners to the present day futures contract.
Futures prices and the bid and asked price are continuously transmitted throughout the world electronically. Regardless of what geographic location the speculator or hedger is located in, he has the same access to price information as everyone else.
Farmers, bankers, manufacturers, corporations, all have equal access. All they have to do is call their broker and arrange for the purchase or sale of a futures contract. The person who takes the opposite side of your trade may be a competitor who has a different outlook on the future price, it may be a floor broker, or it could be a speculator. - 23204
Actually, everyone in the crowd knows exactly what's happening. It's almost like another language. Learn that language and you'll also know what is going on.
How does this differ from the way things operated in the 'old days'? Before there were organized grain and commodity markets, farmers would bring their harvested crops to major population centers. There they would search for buyers. There were no storage facilities; and many times the harvest would rot before buyers were found.
They'd set up a stall on the roadside, and sit and wait for someone to buy something. Often, crops would spoil because the farmers had no way to preserve or store them.
Initially, the first organized and central marketplaces were created to provide spot prices for immediate delivery. Shortly thereafter, forward contracts were also established. These 'forwards' were forerunners to the present day futures contract.
Futures prices and the bid and asked price are continuously transmitted throughout the world electronically. Regardless of what geographic location the speculator or hedger is located in, he has the same access to price information as everyone else.
Farmers, bankers, manufacturers, corporations, all have equal access. All they have to do is call their broker and arrange for the purchase or sale of a futures contract. The person who takes the opposite side of your trade may be a competitor who has a different outlook on the future price, it may be a floor broker, or it could be a speculator. - 23204
posted by X - Men @ 1:39 AM
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