Commodity Trader

What Is a Commodity Trader?

A commodity trader is an individual or business that spotlights on investing in physical substances like oil, gold, or agricultural products. The everyday buying and selling are in many cases driven by expected economic trends or arbitrage opportunities in the commodities markets. Commodity markets commonly trade in the primary economic sector, including industries zeroed in on gathering natural resources for profit. Most commodity trading includes the purchase and sale of futures contracts, however physical trading and derivatives trading are likewise common.

Oil and gold are two of the most commonly traded commodities, yet markets likewise exist for cotton, wheat, corn, sugar, coffee, cows, pork bellies, wood, silver, and different metals.

Figuring out Commodity Traders

A few distinct types of traders are active in the commodities market. Frequently these traders are dealing in raw materials utilized toward the beginning of the production chain. Models incorporate copper for construction or grains for animal feed. Some operate autonomously, trading on major exchanges like the New York Mercantile Exchange, and others work for international oil companies, mining companies, or other large commodity producers.

A commodity trader working for a manufacturer or producer needs to secure the best prices on purchases while at the same time supplying competitive offers to customers. Then again other commodity traders work exclusively as [broker-dealers](/intermediary seller) like Vitol or Trafigura. Professional traders working for brokerage firms assist in making a deep and liquid international commodities with marketing.

Commodity traders now and then act as examiners and endeavor to create gains on small movements in commodity prices. These commodity traders don't actually require the specific asset they are trading and rarely take delivery, yet try to gain exposure through forward and futures contracts. They go long in the event that they accept prices are moving higher and short the commodity when they anticipate that prices should fall.

How Commodity Traders Make Money

Commodity traders react quickly to market-moving occasions. Models incorporate natural calamities that can impact different commodity markets simultaneously. A hurricane can crash sugar or orange yields, sending these prices up on discounted supply. Simultaneously, amble prices shoot up in anticipation of new building and reconstruction costs.

Commodity traders should be sufficiently fast to react to such quick improvements to profitably trade. Slow reactions can bring about powerful losses in the event that the market steers a quick turn off course.

The Downside of Commodity Trading

A commodity trader faces certain limitations compared to traders in different markets For instance, commodity traders create a total return exclusively from the price movement of the commodity they are trading.

Not at all like stock or bond traders, who can earn a dividend or interest payment from the asset they buy, commodity traders don't receive such periodic cash flows. This means that, to produce a positive return, the commodity trader must be accurate in expecting the price heading of the commodity.

Features

• Traders in this area aim to profit off of anticipated trends as well as arbitrage opportunities.
• Commodity traders are individuals or businesses which buy and sell physical commodities like metals or oil.
• Commodity traders might attempt to secure a supply of raw material for a business or industry, to assist with making liquidity in an international market, or to invest in a speculative capacity.