Most new investors to the commodity markets usually want to buy commodities and bet that the price moves higher. That is just the natural tendency of mankind, but there are a lot more trading opportunities in the markets if you also bet on prices of some commodities to move lower.
The commodity markets are usually for traders who use these highly leverage futures contracts to make profits from just a relatively small move in price. So when you trade for a while, you will see that the markets move up and the markets move down. Once you take a couple losses from buying a commodity, you will think – Gee, I could have made some good money if I would have bet that the market would go down. And you can.
It is just as easy to bet that a commodity will drop in price as it is betting it will go up in price. If you are calling a broker to place an order, just tell him you want to sell (insert commodity, contract month, price, etc). Once you re in the position, you will make money as the commodity drops in price. To close the position, you just tell your broker that you now want to buy that same contract and you’re out.
If you are trading futures online, all you have to do is hit the sell button to open a short position. When you are ready to exit the position, you would just hit the buy button.
Selling a commodity that you don’t own may seem strange at first, but it will become second nature once you do a couple of these trades. Professional commodity traders typically don’t have a bias toward buying or selling. They will sell if they feel a market will move lower and buy if they feel it will move higher. The procedures to buy and sell have the same ease, so it is smart to look for opportunities in both directions.
