How it works in Commodities Exchange

Had a very interesting conversation with my colleague today about trading commodity futures. He went to Singapore sometime ago to check out how it really works with futures. Both he and I are genuinely interested in investing for rubber which has doubled its price since May 2010. But, the problem is the amount of risk that we have to bear. Every transaction in commodity exchange has to be done with leverage. That is a MUST. And the amount of leverage varies depending on the type of commodities. For example, the leverage for rubber is 12x. That means we can buy 12 times as much as our money worth. But remember that if we lose money, we lose 12 times as much too!

So trading commodities sound very very tempting for its potential profit, especially these days with the extreme weather still going on around the world. But remember that with all profit that we could get, we also have to face the RISK.