What are the Commodities?

According to the dictionary, commodities are economic goods that may be bought or sold on the commodity exchange. Commodities are everywhere in your everyday living. The moment you wake up, you drink coffee and add sugar. When cooking breakfast of bacon and eggs, you use oil. You put on your 100% cotton shirt and drive your car run by crude oil to your rice farm. In this example alone, you’ll notice that all things mentioned are commodities.

Commodities have their own exchange where traders transact. They are traded in two ways: spot trade or future trades.

Spot Trades

In commodities, spot trades happen real-time and for immediate delivery.  Spot trades are also applicable for currencies.

Future Trades

Commodities are mostly exchanged in future trades due to the fact that most of them have expiration dates. In future trades, transactions are between contracts to be sold at a certain price at a certain date. The contracts indicate how much commodity will be traded.

The Commodities

The major traded commodities are cocoa, coffee,copper, corn, cotton, crude oil, feeder cattle, gold, heating oil, live cattle, lumber, natural gas, oats, orange juice, platinum, pork bellies, rough rice, silver, soybeans, and sugar.

Commodities are like any other security. The golden rule is always buy when prices are low and sell when prices are high.