How to Trade Grain
Grain refers to raw wheat, oats, barley, sorghum, corn and rice. Raw grain is bought and sold on the commodities market. The commodities market is where producers and manufacturers meet to trade in raw materials, like grain, which will be used to manufacture products like flour. Grain is traded mostly as grains futures, which establishes a set price for anticipated grain harvest. Futures are contracts that producers promise to pay now for a specific harvest. The contract guarantees a price if the market price for grain should collapse or pestilence destroys part of the coming crop.
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Instructions
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Establish a trading account with an online brokerage or a traditional commodities broker. A traditional brokerage account will be more expensive than an online account, but you can get the added benefit of having an agent to perform your buying an selling for you in a fast-paced market. If you already have a trading account, adding commodities futures to your portfolio of investments will reduce your level of risk.
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Purchase grain futures at the preferred price. Grain futures will trade at different market rates from morning until close of the exchange. You can buy and sell grain futures to other traders throughout the course of a trading single day. The grain crop report will influence whether you have made or lost money in your futures investment.
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Purchase exchange-traded funds that focus on agricultural commodities, including grains. Exchange-traded funds function similar to mutual funds in that you are part of a collection of owners and pay only a portion of the price. This method also allows investors to earn money on inflation of commodities prices.
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Tips & Warnings
Futures are purchases at a fraction of the cost so be prepared for the risk of high profits and large losses.
References
Resources
- Photo Credit grain and flour image by Madera from Fotolia.com
