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What is Commodity Future Online Trading?

By A. Leverkuhn
Updated May 17, 2024
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Commodity future online trading is a specific kind of investing that focuses on a future contract to purchase physical goods or commodities, and takes place on the Internet. Those involved in this kind of trading might be individual day traders or brokers, or others representing different companies and institutions. Working with commodity futures involves learning about how the markets treat physical goods as commodities.

Commodities futures are contracts between a buyer and a seller. Generally, the buyer agrees to purchase an amount of a specific commodity at a future date and at a set price. The result of these contracts can be traded or integrated into other kinds of financial trades.

Doing commodity futures trading online is just one part of a wide spectrum of investment activities that used to be limited to physical telephone exchanges between an investor and his or her broker. Internet brokerage accounts bring commodities trading and other kinds of classic trading activities to the computer desktop and empower the investor to make quicker and more sophisticated decisions. With respect to commodity future online trading, there’s another layer of abstraction between the actual goods themselves and their values as commodities. This has led some experts to speculate about the final result of allowing certain kinds of commodities trading.

Along with commodity futures trading, modern investors can do other kinds of commodities trading on the Internet. Some types of “commodity exchange traded funds” or “commodity ETFs” are bundled sets of commodities future contracts that can be traded during a public trading day, and tracked over the Internet. Some “commodity index funds” also present a collection of commodities to help curb volatility when an investor wants to get involved in buying, not actual physical commodities, but plays on the future value of those goods.

One of the most popular commodities is gold. Along with other precious metals, gold represents an investment opportunity that appeals to a wide set of individual traders. Precious metals are not the only popular commodities: food items and basic raw materials for food have also been popular. These include grain, coffee, and other exported food products. The popularity of grain commodities futures, for example, has been a driver for a wider discussion about how commodity future online trading, and other investor speculating on food commodities, can affect the global food supply.

Along with allowing for more diversified commodities purchases, commodity future online trading has also helped investors to be able to do more with their money. For instance, some funds allow investors to effectively “short” some commodities, or bet against a high future value. The commodity futures markets are commonly expected to evolve with the greater markets, as world leaders look at how online financial activity impacts physical commerce.

WiseGEEK is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

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