Commodity trading software connects buyers and sellers of raw commodities, including energy, food, metals, precious metals, and financial currencies. Physical market players require a complex system that tracks physical, financial, logistical, and risk management characteristics. Both hedgers and speculators require robust financial features to manage risk. Risk management capabilities are crucial, and the software should be up to date with new commodity offerings. Technical features should include comprehensive current and historical data feeds, technical indicators, and the latest simulation models. Choose a provider with a good record in both bull and bear markets.
Commodity trading software was created to provide an electronic platform that connects buyers and sellers of raw and raw commodities. Since its inception, it has grown into a market for highly extensible, feature-rich systems. Numerous vendors compete to be able to service the billions of US dollars in commodities that are traded through the software daily, including energy, food, metals, precious metals, and financial currencies. When choosing the best commodities trading software, the type of trading, trading volume, and risk management requirements are all important areas to consider.
Physical market players, such as agricultural or energy producers, require a more complex system that tracks and seamlessly integrates physical, financial, logistical and risk management characteristics. Traders sitting behind computers in Tokyo buy oil from New York traders on a shared trading platform at the click of a mouse. All aspects of the physical sale can be handled by an electronic platform, including the actual delivery of the commodity traded in the cash or spot market. Make sure your system also optimizes the costs and coverage of shipping and storing your goods. Physical traders also require the seamless integration of financial trading and risk management to hedge the price risk related to commodity trading, as well as the risks related to transportation and storage.
Both hedgers, also known as physical players, and speculators, also known as traders, require more robust financial features in commodity trading software to manage risk in financial trades, where buyers and sellers agree on the future sale of raw materials at a predetermined price and date. The software should track profit and loss in real time. Many systems also integrate foreign exchange trading to allow traders to hedge the foreign exchange risk associated with commodity sales.
The most important improvement to the commodity trading software is the addition of risk management capabilities. Traders demand and get more robust counterparty and credit risk screening capabilities integrated with their trading platforms. Firms also want more transparency and tighter controls on their individual traders. Risk-taking by a number of maverick traders has been blamed for some of the most spectacular market losses. Look for a system with strong integration with the back office, where risk management policies and compliance are monitored.
Choose a commodity trading software provider who is up to date with the breadth of new commodity offerings. If you’re trading energy, you may want to hedge palm oil or new carbon emissions tools in the future. In foreign exchange markets, Korea’s expanding over-the-counter swap market may be of interest to you when your company starts selling palm oil in Asia next year. Importantly, look for good integration between different products. The best suppliers are the first to offer new products integrated with pricing, charts and cross product models.
Commodities trading software should be strong on technical features. Search for comprehensive current and historical data feeds, a broad set of technical indicators, and the latest simulation models, such as those based on neural networks. Neural network technology, the mapping of the human brain’s thought processes, is becoming more sophisticated and usable. At the same time, choose an interface that is intuitive and easy to use.
Pure financial market traders are often more interested in mapping the minds of top traders to an algorithm rather than functionality when choosing a commodity trading system. While financial traders will continue to buy based on proprietary research, charting and trading pattern tools, caveat emptor. In a growing market, there is always a wave of new proprietary commodity trading software to help you “beat the market”. Make sure your commodity trading software provider is not just following the trend, but rather has a good record in both bull and bear markets.
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