There are two major segments to the commodities market. These are the Over-the-counter market and Exchange-traded markets. These markets can be found below.
OTC market (OTC): OTC means that there is no formal structure for share trading and parties only deal with the source. OTC is spot trading in commodity products. It is sometimes referred to as customized market, because the configuration isn’t official. Nearly all of the trading that occurs in these markets are delivery-based. This trading market is not regulated and there is no requirement for disclosure of information between the parties. Trades are therefore at the risk of the other party. Each counter party, just like an ordinary agreement relies on the other to fulfill their obligation.
OTC Agreement: A OTC agreement or contract is a contract between two parties in which they agree on the terms of a future special trade or contract. In simple words, it will tell you when the agreement will be fulfilled, what date will it be honored, and what price. Examples of such agreements include forwards and swaps.
Participants – Most people involved in special commodities, such as the wholesalers, farmers, processors, etc, trade through such a market. Each buyer and seller of commodities has their own broker or agent who negotiates for their desired price ranges.
Market that is exchange-traded: – Market that is exchange-traded is also called the derivatives market. It is where commodities are traded over the exchange. It is standardized in its nature and has been carefully regulated. The exchange acts as an intermediary for all commodity transactions. It takes first margin from both sides of the deal in order to provide assurance. The Forward Market Commission oversees all commodity trading exchanges.
Margin – A margin trading accounts allows an individual to borrow money (take out a loan) from a broker to purchase an investment. Margin is the difference between the amount of the loan and the value of the securities.
Moving average: – The stock’s average share price over a given period of time. The 50-day and 200-day moving averages are used for many times.
Quote: Information and data about shares, the latest trading price. This can sometimes take up to 20 minutes, if you are using an actual broker buying or selling platform.
Rally – An increase in the general market price or stock price.
Sector: A collection of stocks that are involved in the same business. One example would be the Technology sector which includes corporations like Apple & Microsoft.
Spread: This refers to the difference between the ask and bid prices for a stock, or the amount someone is willing to buy it.
Volume: Number of stocks traded in a given time period. Usually measured in daily average trading volume.
