While most people think of commodity traders as just a bunch of guys in Chicago the truth is that many different types of investors participate in the commodity markets. Obviously we have floor traders but we also have several types of upstairs traders.
The largest group of traders are definitely the upstairs trader, or traders that are not on the floor of the exchange. Some have floor experience while others do not. The largest group of these are systematic long term trend followers while there are smaller subsets that do purely fundamental and others a hybrid model.
Next up are the global macro traders. They are probably the second largest group of commodity traders as they look to trade disparate and uncorrelated asset classes, as well as get a better picture of global imbalances.
One of the easiest to comprehend examples is that of the oil markets. When oil is climbing Mt Everest like Carl Lewis in the Olympics then you know that there will be some huge dislocations in the economy. Oil and oil service companies will be climbing like no ones business but other companies like airlines and trucking companies will be getting whacked like a rat in a mafia movie.
One area that also gets a ton of attention is that of precious metals. Precious metals have a small piece of the industrial machine but mostly are used as an inflation hedge and as an asset backed alternative currency as more and more of the fiat currencies look long term bankrupt.
Another huge piece of the economic pie is that of industrial commodities. Industrial commodities comprising aluminum, zinc, lead, tin, nickel, iron, copper, etc are used in everything for everything. If you drive it, plug it into the wall, or live in it then you have industrial metals all around you. And you only need to have accounts with access to three exchanged to trade 95% of all this.
Next up are the agricultural commodities. While some gloss over this section they are actually a huge part of the economy. Do you eat food? Do you drink water? If you answer was yes to either of these questions then you need to pay attention to the ags. If you answered no then call the hospital please. Anyways the ags are important and can be traded based off of the demographics of different nations. Emerging markets are rapidly emerging which is changing the entire supply demand situation of food and water. Monitor and profit from this, or stay ignorant and get unpleasantly surprised.
Obviously commodities are huge part of the global economy. If you are not using and monitoring them you are missing out on some of the biggest puzzle pieces out there. If you are a global macro trader you need to be monitoring all the commodity complexes.
Tags: bonds, business, Commodities, currencies, economy, Finance, hedge funds, investing, macro trader, money, stocks, trading