What is "commodities trading"?
Commodities trading in the traditional investment sense is we're thinking about trading commodities contracts on the secondary market. That's what most people are talking about when they're talking about commodities trading. But what does that really mean? I'm gonna use an example of corn. If you had a farmer who was going to grow a bunch of corn, and say it was going to take him six months to bring that corn to market, many times the farmer wants to eliminate their risk of bringing that corn to market if it isn't maybe worth what it costs to produce for them, so what they'll do is they'll create a contract with somebody that they'll deliver so much corn and for that corn they'll receive a certain price. So now we have a contract of the future delivery of corn. It's that contract that trades on the market in the secondary market, which is really where we have commodities trading, and its really a speculative market at that point, where people are predicting "are we gonna have a lot of corn this year, not a lot of corn"? and that's where a lot of the volatility and when people traditionally think about commodities trading they're thinking about the secondary market for those commodities contracts.
