InvestorQ : What is the role of speculators in the Commodity markets?
Tisha Malhotra made post

What is the role of speculators in the Commodity markets?

krithika Saxena answered.
3 years ago

Speculators are there in the market for a very short period of time. They may look to exit their long / short position within the same day or may look to exit in a few days time. They operate on thin margins, leveraged trades and rapid churning of funds. Speculators are also popularly referred to as intraday traders in the equity derivatives market. Speculators are largely agnostic to direction of the market and are willing to trade both ways i.e. on the long side and on the short side. Speculators typically try to ensure that they are on the side of the momentum of the market overall and the specific commodity they are trading. Since speculators rely heavily on minor trading opportunities in the commodity markets, they extensively base their speculative trades on technical charts, supports, resistances, break-outs, patterns etc. Speculators have a very important role to play in the commodity markets in the sense that they provide liquidity in the markets and also ensure that the bid-ask spreads are kept at the bare minimum.