When international traders talk about commodities, normally we're talking about a physical substance, such as food, grains, and metals, which are interchangeable with other products of the same type.
I do not recommend trading in commodities for most inexperienced international traders. There are simply too many people out there who have more connections, experience and assets than you do and as you find yourself teaming up with them because you are unable to procure the products yourself, you will most likely be cut out of the deal. But lots of my clients ask me about trading in commodities so I wanted to address the matter.
Don't expect other traders in commodities to help you out just because you're new. More likely, they will squash you like a bug. If you doubt this, ask the hundreds upon hundreds of new traders who thought they could make their fast fortune in urea or oil.
Okay, I've warned you off commodities as potential trading products. Now I'm going to tell you that there is a way to do it and do it successfully. But like I've said before, it ain't easy.
All my clients know that research is the key to success in the international marketplace. Usually this research is focused on likely markets and the products that will sell in those markets. In the case of commodities, you've got to go deeper than that -lots deeper.
While it's always a good idea to get as smart as you can about the product you will be trading, this is never more true than when you want to trade in commodities. You've got to do your homework and you've got to do it big time.
You're not going to be a successful commodities trader by merely peeking at buy-and-sell sites on the Internet, picking up a few terms and throwing them around like you know what you're doing. Try this and the folks who live and breathe commodities will scope you out fairly quickly and you will not only look and feel foolish (and rightly so) but you'll also lose your fee.
Once you've done the basic research (that is, identified a commodity and the likely target market for it), head on over to your favorite library and ask your reference librarian for the best periodicals directory they've got. Now start looking through that directory to find those magazines, journals and other publications that are devoted to your commodity of choice. These will include periodicals related to the mining/growing of your commodity and the processing of it as well as related issues such as equipment used when processing your commodity.
Now the hard part: reach into your wallet and subscribe to these publications. Next the even harder part: start reading every word in the magazines and see who advertises in the periodicals. Buy follow-on books, reports and directories that will make you even smarter in this particular commodity. Read them all - many times, if necessary.
If you do this every day, it's very likely you will be able to compete on an almost equal footing with the experienced traders. I say "almost equal" because until you make trades and develop reliable contacts, you'll still be at a competitive disadvantage.
There is another "easier" way to do it. You can seek out and go to work for someone who is actively working in the field. This doesn't even have to be an exporter but simply someone with knowledge and experience who is willing to take you on. You may find these people in the very periodicals you are reading.
Does this sound easy? Nope, it isn't. Trading in commodities is cut throat and competitive. But it can also be a rush like nothing else in international trade. And, oh yeah, it can be quite lucrative. But if you don't do your homework and, in this case, a lot of homework, you will end up disappointed.
Dennis Hessler is the publisher of The Computer User's Guide to Running Your Own Exporting Company and numerous other books, video tapes, software packages and The International Trade Connection newsletter which is designed to show entrepreneurs new to exporting how to get involved in the booming global market. Source : ezinearticle |
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