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Great site Kenny.

Technical Analysis written in a straightforward way so that everyone understands.

There's only a small few who get it consistantly correct and you are certainly in that group. Chris

Thanks for putting this all together and sharing! BHW

Awesome Stuff! Kenny has shown time and time again the ability to show us direction in these markets. Khalsa

Kenny, I appreciate your insight and analysis. You make sense of what I can rarely see.

Thanks for sharing.

Took a gold short at 1240 just closed at 1203 :-)))))))))))))))))) ........ top call!!  Gekko

Commodity Trading


Commodity Trading is the oldest
form of trading and how it all began. A commodity is any Product, Item, or Raw Material that has value and can be traded. Once upon a time it would have been an animal skin to keep warm, or perhaps a shiny bauble that you fancied. It is still exactly the same except, nowadays we have "Crude oil" and "Futures" etc.

Commodities are separated into several different categories:

  • Metals
    • Gold, Silver, Copper, etc
  • Energy
    • Crude oil, Natural Gas, Heating oil, etc
  • Softs
    • Cotton, Coffee, Cocoa, etc
  • Grains
    • Rice, Soya-bean’s, Wheat, etc
  • Meats
    • Feeder cattle, live cattle, lean hogs, etc
  • Financials
    • Bonds, Futures, Options, etc.

Commodity Markets

Commodities are traded in commodities exchanges such as London Metals Exchange (LME), New York Mercantile Exchange (NYMEX) and Chicago Board of Trade (CBOT), etc

Now, most investors cant actually take delivery of these commodities. You cant simply dump a delivery of Natural Gas into a shed and sit back until the price goes up a bit, and  may-be you do have a yard big enough to keep a couple of dozen Lean Hogs in, but would you want to? Fortunately Commodity trading is slightly differently to stock trading.

How to trade Commodities

Commodity trading is done by trading Futures or Options and we will explain how to trade futures options in that section of this website. Another way to trade commodities is by investing in stocks that are directly associated with that commodity.

For example, if you thought Gold was going to rise in value, you could consider buying a Gold mining company whose share price may benefit from increased profits.

You can also invest directly int an ETC that tracks the commodity you are interested in or invest  through ETFs that hold a basket of related stocks from that particular sector.

Why buy Commodities

Commodities can sometimes be a better  investment if stock markets are in decline. If share prices are tumbling, investors may seek a safe haven in commodities under the premise that people will always have to eat, so Rice or Wheat may currently give a better potential return.

It might be a particularly severe winter causing energy prices to rise through increased demand, or a bad summer so the crop yields are poor and demand outweighs supply causing the price to rise.

Prudent investors may want to add diversity to their portfolio by means of commodity trading to help protect themselves from the risk of only holding stocks in case the market crashes.

Commodity Trading - Risks

For a number of reasons, Spreads for most commodities are much wider than with popular stocks therefore you need prices need to rise more before you break even, never mind make a profit, so commodity day trading is much tougher for the small investor.

As with all investments, commodity prices can be very volatile, prices may go down as well as up. Commodity prices can be just as volatile as Stocks and move substantially against you in a very short space of time. 

 Stock Market Basics - Contents

Free Stock Market
Trading Course

A Free 10 part stock market beginners trading course. This trading course offers an introduction to understanding how the financial markets work and how to trade successfully.

"Risk comes from not knowing  what you are doing"

--Warren Buffett--

Financial Spread Betting

Tax Free Trading in the UK*

What is spread betting (spread trading) and how does it work? Learn about the many advantages of financial spread betting and find out where you can spread bet.

Elliott Wave Theory

Learn how Elliott Wave analysis can improve your trading. Find out how to access a Free 10 part tutorial for learning about the basics of Elliott Wave analysis.

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