How to Trade Commodities Online…

 

What is commodity trading? Is commodity trading profitable? How can you trade commodities online? Are you searching for answers? 

Commodities are an indispensable part of our lives. From the food, we consume to the oil we utilize in our vehicles. But, have you ever thought about trading these basic commodities in the market? Yes, the Commodity market is one of the largest markets across the globe. It excels the list when it comes to assets that can make you rich or double your profit. But, the majority of you do not know how to trade commodities online. 

 

In this article, we will explain each point in detail. We will wrap up the article by providing you the top broker's names who can push you towards success and boost your trading standards. Before reaching this point, we must look into the definition of a commodity and what commodity trading refers to? 

What are commodities?

A commodity refers to raw material or everyday items which is used for generating more complex items. One can see commodities as building blocks of the economy. Examples include sugar, gold, oil, copper, etc. The major factor differentiating goods from the commodity is that latter has interchangeability and is standardized in nature. It reflects two equal units of the similar commodity will be identical irrespective of the place they were produced. For instance, one ounce of silver mined in Australia will be equivalent to one ounce of silver mined in Brazil. 

What is commodity trading? 

Traders or people have been trading commodities for thousands of years. The only difference between modern commodity trading and conventional commodities trading is that people traded them physically in the past. Currently, trading occurs with the broker such as T1markets, HFTrading, etc. or on an exchange such as Chicago Mercantile Exchange or London Metal Exchange. To trade commodities online, you require an online trading account and ultra-modern trading platform that paves the way for the market and assets. 

Trading with the broker is safe and simple. It provides globally accepted MetaTrader 4, which has several advantages. These include more than 350 assets, a customized trading environment, multiple time frames, regular price alerts, latest market news, more than 60 analytical tools, lightning-fast speed, and trading on one click. 

Reasons to trade commodities online 

You must be wondering why traders are so interested in trading commodities online? What makes commodities a good investment? The answer lies in the following advantages listed below: 

1) Short selling commodities 

As commodities are traded online via CFDs, traders have the right to sell them instead of just purchasing them. It means that the value does not require to surge for traders to make gains. Moreover, unlike the stock market in the commodity market, there is no uptick rule. 

2) High returns on investment and high liquidity 

There are some goods, such as oil, gold which are relatively more volatile in comparison to others as numerous factors guide their prices. These factors include the economy's political conditions, financial status, climate, demand and supply of the commodity, and price variation due to new export and import rules or policies. Just because of these reasons, commodities can take short-term trading positions and can be very attractive. 

3) Suitable for diversifying your trading portfolio

Diversification of a trading portfolio is essential in trade. It is very well said that never keep all eggs in the same bucket. Diversifications mitigate the risk involved with trades. Commodities are an excellent way to diversify a portfolio. For instance, if you have spent on indices and stocks, analysts will always recommend adding any commodity (as per your wish) to your trading portfolio and trading them concurrently. It will help you when the stock market crashes suddenly or indices fall in value. 

4) Safe investment tool 

Whenever financial market price goes down, analysts advise people to invest in commodities as they are considered a safe investment tool at the time of sudden shock. The demand for essential items such as gold, oil, and corn always remains high. Trading commodity futures have shown tremendous results at the time of economic slowdown and market crash. 

How to trade commodities online? 

1) Opt for an online trading account: You require to open an online trading account to start trading. If you are a neophyte, you can opt for a demo trading account to practice trade with virtual cash for a limited time.

2) Choose a financial market and asset for trading: Firstly, choose the commodity market option and then select the asset you wish to trade CFDs or spread bet on. 

3) Choose to sell or buy commodities: If you think that prices are supposed to surge in the future, go long on your trade. On the other hand, if you think that price is supposed to decline, you may choose to go short on position. 

4) Enter a trade size: Choose how many CFDs or units you wish to trade or decide the spread betting or the amount per point movement. Keep in mind that in CFD trading, a single trade value can change based on the financial tool you have selected to trade. 

5) Apply risk management:  Financial risks are inevitable. They can land you in several problems, or you can even lose entire capital if not taken care of. Thus, including risk management strategies in your plan is essential. 

6) Monitor your trade: Once you have placed a trade, it requires continuous monitoring if you are day trading commodities. You must do this delicately as losses can even exceed your available balance or deposit. 

7) Close the trading position: If you have set the stop-loss order, the trade will automatically close when the price reaches the set level. However, if you are trading without a stop-loss order, you need to do this when the price falls manually. 

Top brokers to trade commodities online

Some trusted and top brokerage firm offering exceptional service at affordable fee include:

1) HFTrading 

2) T1markets 

3) PrimeFin 

The Bottom Line

If you are looking for the right opportunity in the financial market or a reward-generating instrument, you can choose to trade commodities online. It is one of the excellent methods to earn massive amounts from financial market trading. For this, you require a little bit of homework before entering the market. 

Frequently asked questions 

1) What is a commodity?

A commodity refers to raw material or everyday items which is used for generating more complex items. One can see commodities as building blocks of the economy. Examples include sugar, gold, oil, copper, etc.

2) What are the channels to trade commodities? 

You can trade commodities with a broker such as T1markets or with an exchange. But, a larger number of traders prefer trading with a reliable and trusted broker over exchanges. 

3) What are the advantages of trading commodities? 

The advantages of commodity trading, including short selling, provide high returns over investments, highly liquid, suitable for diversifying the trading portfolio, considered the safest instrument at times of economic slows down or market crash.