We know that commodity is exercised via future contracts. In future trading, a minimal amount called the margin is to be locked before carrying out trade as a security. 24 Carat Financial Services is an commodity tips provider that extends recommendations after thorough research and analysis.
Now, suppose, if the prevailing trading price of copper is $50 per kg and the copper future contract is for thousand kilograms. Hence, the total value of copper future contract will be $50,000. Now, let the margin deposited by a trader to carry out trade is $3110. So, we can say that only $3110 is required to control $50,000 worth of copper. For every $1 fluctuation in copper price, the trader will potentially profit or lose $1000 per copper contract he’s engaged in.
Now, if the copper price moves by $2, it connotes 40% move when compared to the margin required to trade copper future contract.
This is the most common and popular risk of commodity market. This risk came into existence due to the derivative nature of commodity trading.
Commodity traders should have a broad viewpoint and perspective over the commodity prices and be updated with every second news because every second fluctuation counts.
Since we trade in futures, one has to generate a future viewpoint on the price of commodities. This is the biggest challenge because movement of commodities depend on varied range of factors. These include political and regulatory changes, seasonal variations, weather, technology, market conditions, transportation delay, supply-demand ratio, etc.
There are many fake tipsters who tend to take in money promising to provide best financial services. One must beware of such fake organizations. Usually the option traders get afflicted by the false stock recommendations providers.
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