Introduction
Contents
Are you new to business?
Want to get involved in Commodity Trading?
Trading Commodities has been a business activity practiced since olden times. Today there is a wide range of commodities and you can trade in the exchange with the help of commodity trading companies.
Let me tell you that Commodity trading requires some kind of specialized knowledge. Contemporary Commodity trading takes place in exchanges like the London Metal Exchange and Chicago Mercantile exchange.
In this article, we will discuss the nitty-gritty of commodity training to understand if it is good for you or not!
Commodity Trading
Commodity Trading is similar to stock trading that includes buying and selling shares of a company.
There are certain exchanges where traders buy and sell commodities with the aim to earn profits. The prices of commodities constantly shift according to demand and supply.
Therefore there are risks and uncertainties involved in commodity trading. Therefore you need to know how does the commodities market work. Without detailed knowledge, it might be difficult to operate in the Commodity Market….especially when you are new to the business!
Types Of Commodity Trading
Commodity Trading can be diversified into four major groups; they include Metal Commodities, Energy Commodities, Agriculture Commodities, and Environmental Commodities.
If you are new to commodity marketing, you need to know these basics, or you might be in trouble, I tell you!
1: Metal Commodities
Metals that are used for construction and manufacturing like Copper, Aluminium, Iron, and Nickel.
Other than this, you could trade in Silver, Gold, and Platinum for the purpose of both Jewellery Making and Investment.
2: Energy Commodities
Energy sources like Oil and Natural Gas are used and traded extensively in the International markets. You could consider other metals like Uranium and Thorium too in this list.
3: Agricultural Commodities
Basically, you include crops and livestock, which act to supply food, and other industries like Textil and others. A few examples of agricultural commodities include sugar, wheat, and cotton.
4: Environmental Commodities
This includes white certificates, energy certificates, and carbon emissions.
Is Commodity Trading Good For Beginners?
Now the important question… is Commodity trading at all good in your early days of business?
Well, for this we need to discuss the advantages as well as the disadvantages of the trading. Only then we would be able to find out suitability, you know! So let’s begin!
Advantages
There are many advantages of Community trading if you are doing this anew. Let’s have a go through of the advantages.
Liquidity
Online Commodity investments are 100 % liquid. So…you could sell them anytime. That’s great!
Just like a stock, you can easily trade (buy and sell) commodities. This denotes commodity derivatives are safer when you are searching for better control over your funds.
So it’s good for green-horned people like you… you are getting the protection after all! Isn’t it?
Reaping Benefits During Geopolitical Events
During events like conflicts, riots, and war, like what is going on between Russia and Ukraine, business completely gets disrupted.
During this time, the supply of goods gets completely choked. Consequently, prices of Iron, Gold, and Crude Oil increase manifolds.
You reap the benefits of such emergency periods. So there are chances of your early growth…so why not deal in Commodity?
Diversification
Try to understand the relationship. When there is inflation in the market, the price of commodities increases. This acts to increase prices and reduce profits.
Shareholders will get less from their investments. The value of stocks will fall. Therefore you are going to get benefits during rising inflation, which is a common phenomenon globally at this point in time.
Transparency
Unlike in the past, commodity trading now happens on electronic platforms. Electronic platforms enable wide-scale participation in the business. During the trading, the identity of buyers and sellers remain anonymous.
Disadvantages
Like the brighter sides, there are also the dark ones that you need to take into account.
Speculative In Nature
The price of a commodity is derived from demand and supply in the market. This is difficult to predict. It is difficult, especially if you are new to the market.
For example, nobody knew that the prices of neon would take off to such staggering heights due to the Russia-Ukraine war!
Excessive Volatility
You know, with commodities such as crude oil, gold is more volatile than others. Large price swings might make you lose focus.
Other than this, the market is highly exposed to Economic and Geopolitical Factors.
So…Trade or No Trade?
Well, like any other business, Commodity trading is extremely risk-oriented. But you can not do any business minus risk and uncertainty.
Therefore we would advise you to start commodity trading in small portions. With time you will gain experience.
Don’t shy away!
Just go for it.
