Why Trade Commodities
Relatively Straightforward
Commodity trading is not particularly complicated because there are only about forty viable markets to trade. This is in stark contrast with Stock Trading where potential traders have over ten thousand potential assets to sift through.
Affordable & Simple
Trading commodities has never been easier than with our Investment/Mining trading platform. Using tools providing short term expiry time from a minimum of 1 min to a maximum of 1 month available on the platform, it is now possible to access the financial market with investment amounts as low as $5. With Investment/Mining, you are also concerned with the direction (and not the magnitude) of the price movement of an underlying asset.
High Volatility
Volatility is a concern when trading commodities. However, this particular characteristic also means that the commodity markets offer more lucrative opportunities for traders. The key is to conduct enough research and analysis on an asset before investing.
Easy Analysis
The price movement of assets in the commodity market can be studied through technical analysis. This method of forecasting future prices is based on the premise that you can analyse the past to predict the future.
Factors That Influence Commodities
Shares of companies are influenced by several events. Understanding these events and their impact on the value of a stock can inform successful trading decisions.
Surplus
To understand how supply and demand affects the commodity markets, let’s consider the behavior of oil as a financial asset. If the supply of oil increases but demand remains constant, the price of oil per barrel decreases. Conversely, if more people are using oil but the industry cannot match the demand, the price per barrel increases.
For example, the unceasing production of oil by Saudi Arabia and America in recent times has caused the commodity to decrease in value.
War & Conflicts
Wars and other conflicts can cut off a country’s access to the materials it needs to function. They create uncertainty about the future availability of commodities and the risk associated with reduced supply can have a significant impact on prices and demand.
When war breaks out near or around shipping ports, the transfer of certain commodities can also be disrupted.
Natural Disasters
Weather conditions can have a significant impact on the commodity markets because most of the assets transacted are agricultural in nature. For example, a deep freeze in Florida can affect orange crops. When this happened in the past, the price of the commodity experienced a hike.
This has to do with supply and demand. With a high demand and a reduced supply, a commodity is likely increase in value.
Popular Commodities
Gold
Gold is one of the world’s oldest traded commodities. It has a negative correlation with the U.S. dollar; although, this relationship has weakened over the past few years. Gold also exhibits a positive correlation with the Australian dollar and the Swiss Franc. The commodity is traded on the market from 03:00 GMT to 19:00 GMT, Monday through Friday.
Oil(Brent Crude)
Brent Crude is a trading classification of crude oil that serves as a major benchmark price for purchases of oil worldwide. It is extracted from the North Sea and offers excellent opportunities to profit in nearly all market conditions. This is due to its unique standing within the world’s economic and political systems. The commodity is traded Monday to Friday from 03:00 GMT to 19:00 GMT.
Silver
It’s a little known fact that silver is generally extracted from copper, gold and zinc ore, rather than mined in its own right. As a result the price of silver is largely determined by the demand for these other metals. The commodity is traded on the market, Monday to Friday, from 03:00 GMT to 19:00 GMT
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