When considering trading commodities you need to be aware of the variety of different commodities that are accessible and available for trading. Commodities are raw materials that are utilised in human living, for example, metals are used to manufacture tools. They are primary resources which can be traded into quantifiable amounts. There are three categories of commodities which are energy, metals and agricultural. Commodities are tradable, they can be used as an investment vehicle. Commodities are also deliverable which means they can be delivered in physical form. They are also liquid artifacts, which have an accessible, active market. This means that the commodity can be either bought or sold. Trading commodities involves risks which involve geopolitical factors, speculative risks and the risk of fraud in trading commodities. Examples of commodities are gold, silver, oil, coffee, corn and gas. Commodities are often labelled as hard or soft commodities, coffee is an example of a soft commodity and oil is an example of a hard commodity. There are around 50 major commodity markets across the world which involve physical and virtual transactions and exchanges.
Trading in commodities has become a fundamental source of world wide trading. Due to advances in technology new commodities are appearing in financial markets continually, for example, silicon chips. Commodities can be traded in a range of different sizes and proportions. Many are traded in large volumes and participate in international exchange. The commodity is the financial instrument which works as a financial derivative in the commodity market. The value of the financial instrument is derived from the specific commodity.
Commodities are traded on the commodity market. This is a combination of internal commodity exchanges. The commodity markets consists of floor traders where traders represent themselves or by brokers, forms or organisations who participate in trades on the basis of someone else. If a product can be traded using future contracts or using ETFs (Exchange Traded Funds) then it is considered a commodity as well. ETFs involve buying into a fund, with diversification inherent in a mutual fund on offer. You can purchase and trade a fund in the same way as a regular stock. You can also trade commodities with forward contracts or future contracts.
Profits are possible for traders who invest time in deepening their knowledge of commodities and current events in which they are involved. For a serious trader, it is important to research about the relative commodities and be up to date with the financial news. You can discover the price of crude oil for example or you can research how the price of gold has been trending over the last few weeks, months or years. By using technical analysis you can be informed about the movements of commodity prices, speculate on their directions and evaluate their previous behaviour. You can also research further by studying charts to become aware of patterns and trends. You can visually identify patterns before deciding on whether to buy or sell commodities.
Risk warning: Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.