Trading in commodities is the oldest form of trading between people and today many people invest in various agricultural products, energy products and metals thanks to the fact that online brokers have made it easy for traders to trade from home via their trading platforms.
Commodities/Raw materials are divided into two categories; soft raw materials, which consist of agricultural products, and hard raw materials, which consist of metals and energy products. All commodity trading takes place in units; oil is traded in barrels (BBL), wheat is traded in bales (BU), coffee in pounds (LBS), gold in (OZS) and so on.
Commodities can be traded with CFDs, which means that traders do not own the underlying instrument but only invest in the commodity's value development. Traders thus do not have to be afraid that they have a ton of wheat waiting for them in another country.
Commodity trading with CFDs via online brokers is done with leverage, which means that the invested capital increases in value and with it also the potential gains or losses.
Some traders believe that trading in commodities is easier compared to other types of financial instruments because the trader only needs to take into account supply vs. demand. Let us take two examples. If less favourable weather conditions occur, the value of agricultural products goes up in price and during a boom, the price of metal, such as iron, goes up because it is needed for the construction industry.
Many events, which growers or miners cannot predict, will affect price changes in the commodity market. The supply can suddenly decrease or increase due to economic and political events around the world and not least the weather conditions can cause great damage at the last minute. If supply decreases and is not in line with demand, prices will skyrocket and if supply exceeds demand, world market prices will fall.
Raw materials are something that humans depend on, whether it is a recession or a boom. The only question is how much raw material is needed. This means that the value of a raw material can plummet, but it never loses its entire value. As in times of unrest, trade in gold increases, but when times get better, the value drops a bit but it does not lose the entire value because demand is always there.
o start trading commodities, you must first select an online broker and open an account with them. Once you have made a deposit, choose one of the raw materials.
If this is the first time you are going to trade commodities, it is a good idea to try commodity trading on a demo account loaded with virtual money that most online brokers offer. With the help of the demo account, you will learn how to manage the trading platform and how the trading itself takes place. Once you understand how trading works, you can trade with your real money.
It is possible to write an entire book about why commodity trading is a good market to invest in, but unfortunately there is no room to go deeper into it but the following reasons are just three of many:
Tradecfd has reviewed five online trading providers, which have customers around the world and turn over huge sums every month. When the compilation was done, we looked at whether the companies were regulated and licensed, followed laws and regulations and had a good reputation.