Classification of Traded Goods by Liquidity

Commodities Classified by Size

This paragraph contains a classification of the top ten commodities with the highest trading volume in the United States in 2021, according to the calculations of the Futures Industry Association.

What to Consider When Looking at Liquidity

This paragraph highlights the importance of liquidity in commodity trading, stating that high-volume commodities are the most liquid and easiest to buy and sell, carrying lower risks of loss due to slippage. It also explains that trading volume, open interest, and volatility are among the most important factors in evaluating commodities or futures. Major economic forces, such as supply and demand, speculative buying, and developments in investment products, affect the liquidity of the commodity.

What Are Some Factors in Liquidity?

This paragraph indicates that liquidity and activity are the result of price movement. While some markets, like gold and crude oil, attract a large number of market participants, lumber and frozen concentrated orange juice markets typically suffer from liquidity issues. The liquidity of commodities is influenced by supply and demand fundamentals. For example, if there is a sudden shortage of a commodity and the price begins to rise, this will attract speculative buying. On the other hand, if the market faces an unexpected large supply, speculative selling is likely to emerge. In both cases, trading volume and open interest are likely to increase.

Frequently Asked Questions

This paragraph contains answers to some frequently asked questions about commodities, such as what commodities are and where they are traded. It states that commodities are natural resources and agricultural products that are traded wholesale. Examples include wheat, corn, cattle, cotton, lumber, sugar, and fossil fuels. Precious metals, like gold, as well as local and foreign currencies, are traded as commodities. Commodities are traded on futures exchanges, where investors can buy and sell commodities using standard contracts that include price and a future delivery date. These exchanges have a clearinghouse that confirms and settles transactions.

Source: https://www.thebalancemoney.com/the-most-actively-traded-commodities-809314