The typical image of the floor of the Mercantile Exchange being filled with a bunch of guys that couldn't get jobs anywhere else is very outdated and wrong. Instead commodity traders are increasingly becoming some of the most sophisticated investors on earth.
The largest group of traders are the upstairs traders, to differentiate them from the floor traders. Inside of the upstairs traders that largest group is that of the systematic long term trend followers. The next biggest group of commodity speculators are the global macro traders.
Some global macro traders are always involved in the commodity markets while others don't actually do a ton of trading. But one thing that all global macro funds do is track and forecast commodity prices. This is so that they have a better grip on raw materials cost as well as where on earth are things growing fast and slow. It basically gives a great picture of the macroeconomic landscape.
For instance if oil is rising like we saw in 2008 then you have to look to see what businesses are going to get hurt and what will benefit from higher oil prices. Obviously oil companies will make more money but what about shorting airlines? Or maybe even going long railroad companies. As you can tell there are endless ideas of who is affected and who is not.
Another heavily monitored sector is that of precious metals. Gold and silver are great historic gauges of inflation and these days also act as alternative currencies since the Fiat currencies are all in shambles. If you aren't following gold then good luck trading bonds and the US Dollar. Yes, this stuff is that important.
After the shiny stuff we have the industrial metals. Things like copper, nickel, tin, iron, aluminum, zinc, and lead are all in this group. Cars, trucks, phones, computers, etc all have large amounts of industrial metals and are vital to the worlds economy. If you are not tracking industrial metals then you are missing out on one of the largest parts of the commodity complex and a vital part of the economy.
Agricultural commodities are the last major group of commodities and the ones that tend to get the shortest thrift. This is a mistake as the worlds economies continue to grow and more and more people become more prosperous they eat better and better. This coupled with the fact that there is less water on earth and you have the potential for a large increase in the price of food worldwide.
Obviously commodities are a huge component of the global economy. Not only can you make some great trades in these markets but you can also get a better picture of what will be happening in other asset classes, kind of like the missing pieces of the puzzle. - 22871
The largest group of traders are the upstairs traders, to differentiate them from the floor traders. Inside of the upstairs traders that largest group is that of the systematic long term trend followers. The next biggest group of commodity speculators are the global macro traders.
Some global macro traders are always involved in the commodity markets while others don't actually do a ton of trading. But one thing that all global macro funds do is track and forecast commodity prices. This is so that they have a better grip on raw materials cost as well as where on earth are things growing fast and slow. It basically gives a great picture of the macroeconomic landscape.
For instance if oil is rising like we saw in 2008 then you have to look to see what businesses are going to get hurt and what will benefit from higher oil prices. Obviously oil companies will make more money but what about shorting airlines? Or maybe even going long railroad companies. As you can tell there are endless ideas of who is affected and who is not.
Another heavily monitored sector is that of precious metals. Gold and silver are great historic gauges of inflation and these days also act as alternative currencies since the Fiat currencies are all in shambles. If you aren't following gold then good luck trading bonds and the US Dollar. Yes, this stuff is that important.
After the shiny stuff we have the industrial metals. Things like copper, nickel, tin, iron, aluminum, zinc, and lead are all in this group. Cars, trucks, phones, computers, etc all have large amounts of industrial metals and are vital to the worlds economy. If you are not tracking industrial metals then you are missing out on one of the largest parts of the commodity complex and a vital part of the economy.
Agricultural commodities are the last major group of commodities and the ones that tend to get the shortest thrift. This is a mistake as the worlds economies continue to grow and more and more people become more prosperous they eat better and better. This coupled with the fact that there is less water on earth and you have the potential for a large increase in the price of food worldwide.
Obviously commodities are a huge component of the global economy. Not only can you make some great trades in these markets but you can also get a better picture of what will be happening in other asset classes, kind of like the missing pieces of the puzzle. - 22871
About the Author:
If you need actionable trading ideas then check out The Macro Trader It is a weekly global macro trading advisory publication with frequent intra-week updates for time-critical analysis and actionable trading ideas.
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