As with any thing that is a specific niche industry – commodity trading uses a lot of its own terms for things that may seem fairly standard. First off, you might need to know what sort of commodities are out there for trading. Standard commodities that go through the commodity trading market include things such as natural minerals, meat, vegetables and luxury food stuffs such as coffee. These are examples of specific commodity markets. Which market you choose to access in regards to commodity trading is entirely up to you. Although you are best served by buying commodities that are in demand or are not suffering in value.
Next you will need to understand what a contract is in regard to commodity trading. This one is pretty straight forward. It is just the details about the trade all rolled up into an easy to read and understandable agreement that is relevant to both parties involved in the trade. In order to start commodity trading you will need access to a commodity exchange. This is also pretty straight forward. It is the central place that brings people who wish to trade commodities together into a single place for commodity traders to buy and sell from.
Some commodities come with standard contracts. This is generally denoted by the amount of product available per contract. For instance, silver may come in ounces – so you may have to buy one hundred ounces of silver at a time – this will be the standard contract for silver. The next commodity trading term is not as self explanatory. Contango is the storage cost for the commodity – if you are not taking delivery of the stock sold in the contract it will need to be stored somewhere. Contango is the cost associated with the storage of the product you hold the contract on.