Each commodity exchange has certain listed commodities and permitted commodities, which are traded on its floor. The trading on the floor is confined to the members or their authorized representatives. Investors interested in buying or selling place their orders with their respective brokers, who are commodity exchange members. The brokers and their authorized representatives assemble on the trading floor during the official session to execute the orders placed with them.
The trading floor consists of several trading posts for different groups of commodities. A member or his representative wishing to buy or sell a certain commodity reaches the trading post where that commodity is traded. Here he comes in contact with others interested in transacting in that commodity. Buyers make their bids and sellers make their offers, and bargains are closed at mutually agreed-upon prices.
What types of order can a client place with his broker? A client, while placing an order with his broker, may specify the price and time dimensions. As far as the price dimension is concerned, basically, two types of orders may be placed: market order and limit order. A market order is to be executed as soon as possible at the best prevailing price on the market. A limit order, on the other hand, is constrained by the price limits specified by the investor. In the case of a limit order to sell, the seller specifies the minimum price that the commodity must fetch and, in the case of a limit order to buy, the buyer specifies the maximum price that he is willing to pay.
The time dimension of an order reflects the time frame in which the order has to be executed. A day order remains valid only for the day when it is placed. If the order is not executed on that day, it automatically lapses. A week order is one which is active for a week. A month order is an order which is valid for one month. An open order remains in effect until it is executed or cancelled.