Commodities are the most basic and reliable goods to base your trading on. The practice of exchanging commodities is so old that it may, in fact, be the very first form of trading. A commodity could denote any physical item which humans value. As such, they will continue to be a vital part of trading as long as humans exist. This could be perishable items like wheat, meat, and animals. Items for energy like coal, oil, or natural gas could be included. Gold and silver are examples of items that have less obvious uses.
The History of Commodity Trading
There is obviously quite a disconnect between how commodity trading may have functioned thousands of years ago, and how they function today. This is why we will shortly go over the history of commodity starting in the ancient era.
Trading in commodity trading originally referred to the trading of commodities of equal values without intermediaries (i.e. money). money). It could have been grains for gold or anything else people thought of. Monetary exchanges would have started over 6000 years ago, around 4000 BCE. In the ancient world (Mesopotamia, Egypt), people would have traded these items directly. Soon after, monetary exchange systems developed. In Sumer, for example, townsfolk would exchange clay tokens in exchange for, say, livestock. In tandem, they developed writing systems to record and keep track of all their exchanges. You could usually see engravings of these information on clay tablets. These clay tablets could be compared to the oldest contracts.
Over time, people started to value other commodities. Gold and silver are two of the most popular commodities because of their visual appeal. People began to adorn themselves in them to display their status. People could easily create any shape from them and adjust their volume. These items, which were highly valued but had little practical use, slowly found other applications. These items were used as a currency, an intermediary for exchange.
People continued to exchange commodities over time for services, other commodities or land. In most cases, they would try to estimate the value of a commodity by weighing it. Gold and silver were used as alternatives to these traditional commodities.
Modern Trading
Amsterdam Stock Exchange was founded in 1530. People would use, what are today, rudimentary contracts for exchanging goods. Forward contracts, options and short sales are all included. This sort of institution became quite popular and spread all over Europe and subsequently to the United States. From there it continued to develop into the 19th and 20th centuries.
You have two choices in today's world. You should be aware of the different types of commodities markets if you decide to invest in this market. These are the Over the Counter market (OTC) and the commodity trading documentary Exchange Based market. OTC markets are direct exchanges between two parties without the use of an intermediary. Exchange-based markets are organized by a clearinghouse to ensure that settlements take place.
Popular Investment Commodities
It is obvious that there are a large number of commodities to consider for trading. We will provide a brief summary of the most common commodities to give you an idea. They fall into three different categories: energy (metals), agricultural (meats and agricultural), and agricultural.