Entering into commodity basis trading industry is a tough decision yet, can be very lucrative in the long run. In order for you to do so, you invest to a lot of things such as eBooks, Books, and attend several commodity basis seminars and execute of the things you’ve learned so far. However, perhaps you encountered terminologies which can be a bit confusing. There is a chance that you need to pause for a while and look for the meaning of a certain word or perhaps abbreviation. All in all, to catch up things quickly, you need to understand and read this as your commodity broker crash course.
Stop Loss Order / Stop
The word “stop” itself can easily catch your attention. When it comes to commodity trading, this means that a certain order will only take place if the market has reached the level featured in this type of order. This is essential that can be helpful limiting your losses. When you see this term, the situation is either buying or selling the order. For an instance, you are using a certain app that features “Sell Two Grain Order at $29.99 Stop” This means that there is an investor that bought this asset higher than the existing price which is $29.99. This person wants to limit his or her lost for around this certain level of price.
Hedge
You might encounter this term several times, but what in the world is a hedge anyway? Hedge simply determines the sale of any commodities available from the online platform which you are engaged with. Hedge is a commodity when it comes to further delivery of the asset such as veg oil prices, for future market. Such sales are often offset by quantity executed by the holder of the asset or purchase the same commodity.
Invisible Supply
This term is somehow a misunderstood word in trading market information especially for beginners. Some would presume that these are the losses of assets. However, this term simply determines the encounter stocks at hand which are somehow cannot be accurate for several reasons. This commonly happens for wholesaler manufacturers and consumers.
Crop Year
Commodities can be simply predicted by many investors through season. Most of the commodities are seasonal which means that there is a period of time to harvest in a yearly basis. For example, in the Western countries, wheat season begins in June, while cotton begins on May up to August. The movement of the price will vary depending on the dates of the commodities and the location. Most professionals in the commodity trading business had mastered their strategy by determining the crop year of a certain commodity after another all year round.
Arbitrage
Often you see this term when you assess . Arbitrage is a simultaneous trade or purchase of sale of the same asset, the same quantity in different markets. This can happen in the same or different countries. This term is used to take the advantage of what is presumed and believe that the assets are having a discrepancy when it comes to the commodity cash trading.
Commodity Basis 