long term commodity investing

Long Term Commodity Investing

By: www.CandleStickForums.com

http://www.candlestickforums.com/

Long term commodity investing can be used as a hedge against inflation, a

means of balancing an investment portfolio against

the slide of the dollar.



The market sets the price of commodity futures based on expectation of what the spot

price will be the day of contract expiration.



For example, oil futures for July 2010 delivery are $76.31 a barrel for light sweet crude.

December 2018 light sweet crude futures are $94.98.



Despite oil selling for $150 a barrel just a year or so ago the market only expects to see oil to go up by less than

25% in eight and a half years!



If you assume that the market expects to see the dollar languish a bit then the

commodity market does not expect to see the price of oil

go up.



An excellent means of learning long term

commodity investing as well as short term trading of

commodities is with Commodity and Futures

training.



With the use of fundamental and technical analysis traders can follow oil prices, futures

prices, the fortunes of oil companies, and the rate of

exchange of the dollar.



Using such technical analysis tools as Candlestick pattern formations and engaging in

Candlestick trading tactics it is possible to profit from

trading in the short term. It is also possible to profit from

long term commodity investing.



In commodity investing over a longer time frame the trader may be more interested in

hedging against inflation and the fall of the dollar or in betting

that a sustained economic recovery will emerge and drive up the price oil futures, natural gas futures, copper futures and futures in other raw materials.



When considering long term commodity investing the

trader needs to learn about which commodities are useful

for long term investing.



Here we are not talking about buying the commodity itself

but in investing in commodity futures. One of the practical

reasons for not trading commodities is lack of

information. Commodity markets are largely to

province of producers and buyers of commodities.



Mining companies, for example, will hedge their risk by selling futures contracts.

By selling contracts at slightly less than next year’s

expected spot price the company will lock in part of

their necessary cash flow at a reasonable price.



The buyer will likewise lock in a manageable buying price.

Commodities traders can profit from these actions. Oil

producers, using the preceding example, are

interested in having some degree of stability to the oil

market.By: www.CandleStickForums.com


So long as they can lock in a profit on part of their

production they will be pleased. If, for example, the

price of oil goes up substantially these companies will still profit to a degree on

the futures they have sold and more so on then current

production.By: www.CandleStickForums.com


Long term commodity investing in oil futures, for

example, could be very lucrative if the recession

mends itself and the price of oil goes up.



The commodity trader will have bought oil futures for delivery in 2018 at today’s low price. He or she will be

able to cancel out the contract by selling at new,

higher price.



If, in fact, the dollar has slid in value the trader will have successfully hedged against the effects of inflation and

pocketed a little extra along the way.



In long term commodity investing, fundamental

commodity analysis and the investment time frame are important in formulating

investing goals.

