The Process of Buying & Selling Commodities – Types of Orders

By: Sarah Carlye

Part of the process of buying and selling commodities is the order. There are different types of orders are available to use. The order is the contract between a commodities buyer and a commodities seller that gives the buyer of the option the right (not the obligation) to buy a commodity or to sell a commodity for the strike price, this is an approved and agreed upon price by a specific date. The offer expires at the end and the contract would need to be rewritten if the buyer wants to have the option again. Some of the orders that are available when buying and selling commodities:

* Market Order-this is among the most common type of order. With this type of order, the customer chooses a specific commodity or commodities that he or she wants to buy or to sell. The customer chooses the number of contracts that will deliver monthly. The contracts will not have a price on theme. Where the price will go, it will say either “at the market” or it will say “at current price” when the order goes to the trading it. Allows for the hedger (speculator) to get in or out fast. Time is the priority, not price.

* Market on Close Order/ Market on Open Order-are variation of the market order. This is when the order will be executed at the close or opening of a market.

* Buy Limit Order-this order is only filled at the specified price “or better.” This order specifies a price limit for the order be filled. The goal is to buy at the lowest price possible for the commodity or commodities. Buy limits can be placed above the market. This will turn a buy limit order into a market order. The same is true if the current price is below the limit price.

* Sell Limit Orders-this order is only executed at the current market price or higher. The goal is to sell the commodity or commodities at the highest price. A sell limit can be placed below the market, and like a buy limit above the market, the sell limit order becomes a market order.

* Stop Order-this order is the opposite of a sell and buy limit order. The buy stop will be placed above the market and a sell stop will be below a market. It becomes a market order when the stop level is reached in the specified commodity or commodities.

There are many more types of orders, but these are the basic ones that are most commonly used when buying and selling commodities. There are programs so that you can practice using the various types of orders. Most investors choose to work with an experienced company like New Century International is a commodity and foreign exchange expert. To get started investing in commodities; contact one of the specialists to find out more about New Century International and the service they provide.

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