Commodity. What is traded on the stock exchange? Commodity Exchange

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The financial market attracts a large number of people with its opportunities, as it seems to them, fast, simple, with a convenient mode of high earnings. However, according to statistics, such hopes are completely unjustified, since most of them lose their funds. This is due to the fact that many users take trading on the stock exchange lightly and treat trading like in a game.

To really make money in the financial markets, you need to go through special preparatory training and learn how to choose the right trading assets. Each commodity has its own characteristics, properties, profitability and, one might even say, "character". What is traded in the financial markets and how it happens, the reader will learn from this article.

Commodity exchange definition

Before you plunge into the alluring world of trading, you need to understand what financial markets are and their features, and have information about the trading assets that are used on them. It is absolutely impossible to trade profitably and stably if you do not understand what a currency, stock or commodity exchange is, as well as the principles and patterns of its work. Each direction of the financial market has its own characteristics, which must be taken into account when choosing both an asset and a type of trade. For example, on Forex, currency pairs are used as an instrument, and in the stock direction - securities, shares of companies, bonds.

By definition, a commodity exchange is a specialized platform where exchange financial transactions take place literally every second. By and large, this is a regular wholesale market with high competitiveness, liquidity and volatility. Due to supply and demand, transactions for sale and purchase are constantly taking place on it. All transactions occur according to certain rules, and commodities used as trading assets are always fungible products and their derivatives.

History of occurrence

In the 15th century, when the first exchanges appeared, there were no separate buildings allocated for them, and all transactions took place on a specially designated area. In 1409, the world's first stock exchange was opened in the city of Bruges. The stock trading direction appeared a little later, in the 16th century, and at the same time buildings for stock exchanges were built, which gradually developed in Europe. In the United States, this type of trade gained popularity only in the 19th century. This is due to the fact that at this timein the United States, an intensive growth in the development of capitalism began.

In the Russian state, the first commodity exchange appeared at the beginning of the 18th century at the direction of Peter I. Its existence lasted until the beginning of the 20th century, and then the revolution began and completely different priorities were set in the country due to the peculiarities of economic policy USSR. However, with the development of market relations, Russian legislation has already been revised and the work of exchanges has been resumed.

Commodities

Almost all over the world, agricultural and natural products, as well as their derivatives and contracts, are used in financial transactions for the purchase and sale of commodity, industrial and raw material exchanges.

Types of commodities:

• Food products (sugar, potatoes, nuts, coffee products, eggs).
• Cereals (corn, wheat, rye, rice, oats).
• Oil-containing assets (sunflower seeds, flax seeds, beans, soybeans).
• Wool, cotton, satin, linen, silk and other textile products.
• Food concentrates.
• Livestock products (cattle and pork, meat and live species).
• Rubber.
• Non-ferrous metals (gold, zinc, nickel, silver) and other types.
• Forest products (fibreboard, plywood and other industrial raw materials).
• Natural resources such as oil, gas, coal and their derivatives.
• Ferrous metals.
• Pulp and paper products.
• Non-ferrous and black ore and others.

Types of exchanges

All exchanges work in two directions. According to historical data, initially there was no separation between them, but gradually it appeared due to the development of the world economy, the scaling of trade and technological progress. Each direction has certain properties and features, as well as a narrow specialization of exchange commodities.

Separate 2 types of exchanges:

1. Universal direction.
2. Specialized species.

What is traded on the stock exchanges? From the above list, you can understand that almost any product finds its seller and buyer. However, not all of them have the same trading characteristics. Some assets have more liquidity, which means they are more in demand on exchanges, while others, on the contrary.

The largest volume of transactions occurs in the universal direction. For example, the Chicago Board of Trade or the Chicago Mercantile Exchange, where commodities are traded, ranging from various foreign currencies, lumber, precious metals, industrial and grocery goods, to sales and purchases of live animals.

Specialized exchanges have a narrower focus. They are divided into certain groups. For example, the New York Stock Exchange deals with coffee products, grains and grocery products, while the London Stock Exchange buys and sells metals.

Stock trading

Specialists who make money in financial markets through speculative trading are calledtraders. They buy commodities at a lower cost and sell at a higher price. The difference between buying and selling is the profit on the trade for the trader.

Many beginners, having seen and heard enough of various stories about speculative trading and high earnings, want to learn how to make money on the stock exchange. If a person decides to devote himself to trading, then he needs to undergo basic training in order to understand the rules of exchange trading.

Speculative trading

In fact, in fact, traders do not physically buy or sell anything, but only speculate on assets, that is, on their decrease and increase in prices. Next, an example of how to make money on the stock exchange will be considered.

All traders before the start of trading conduct an analytical forecast of changes in market quotations for selected assets. This is done in order to understand in which direction the price will move and open a buy or sell position in the same direction. For clarity, we can consider an example of an exchange transaction.

Let's say a trader has determined that during the day the chosen trading asset will go down in price. He places a sell order and opens an exchange transaction. If his forecast comes true, then he will be able to earn a certain amount of money, which depends on the size of the position of the speculator and the value of the asset.

Financial risks

On any exchanges where speculative trading takes place, there are always risks. This is due to the fact that with absolute certainty it is impossibleto speak and predict when and where exactly the market quotes will move, that is, go up or, conversely, go down. For a speculator, an accurately made forecast is a guarantee of his earnings. If the trader's analytics is justified, only in this case he will be able to earn.

Every financial transaction that takes place on the stock exchange is insured by a speculator using a special tool, a protective stop-loss order. In the event that the forecast in the direction of the market movement is incorrect, then, having reached a certain level specified in the parameters of the protective order placed by the speculator, the exchange transaction will be closed automatically and the loss on it will stop. Of course, the trader will lose some of the money, but the main amount of his balance will remain. Therefore, professionals advise all beginners to trade with financial risks of no more than 2% of the deposit.

Functions of commodity, stock, currency and commodity exchanges

Exchanges provide not only services for speculative transactions, through which traders earn money, but also fulfill their main duties and tasks:

1. They price commodities, which then analyze the level of supply and demand for assets.
2. And also their functions include tracking, regulating and controlling the obligations of sales contracts and checking the system of mutual settlements.
3. In addition, hedging occurs on exchanges, that is, insurance and guarantee for exchange assets.
4. To additionalfunctions include the following services: speculative trading; financing and arbitration; investment and other opportunities.

Conclusion

For activities on the stock exchanges, a wide variety of trading assets are used, which are divided into several areas. They open up opportunities for earning not only for large commercial banks, funds and companies, but also for private investors, as well as medium and small speculators. To receive income using exchanges, you need to know its rules of operation, as well as be able to evaluate and select exchange assets.