How many of you have heard of Baltic Dry Index? This is one chart every investor/trader should look at because it gives a true picture of real economy. Ok, first things first - What is Baltic Dry Index (BDI)? It's a number issued daily by the London-based Baltic Exchange, which gives an assessment of the price of moving the major raw materials by sea. The index measures the demand for shipping capacity versus the supply of dry bulk carriers; and indirectly measures global supply and demand for the commodities. It is an accurate barometer of the volume of global trade. How does it work? Every working day, the Baltic Exchange asks brokers around the world on how much it would cost to book various cargoes of raw materials on various routes—150,000 tons of iron ore going from Australia to China or 150,000 tons of coal from South Africa to Japan. Brokers are also asked to consider variables such as the type and speed of the ship and the length of the voyage. Based on the answers, a number is arrived at which represents the shipping costs. The Baltic Dry index represents the true price at which shipping is done and has no speculative content. People don't book containers unless they have cargo to move. BDI is termed a leading economic indicator because it predicts future economic activity.