Commodities trading is the buying and selling of raw physical asset or raw materials.
Trade your opinion of the global commodity market with products such as gold, oil, natural gas or precious metals.
Commodities are commercial products that appear naturally in nature or are agriculturally cultivated. These products can be divided into two main types.
Hard Commodities – These commodities are extracted or mined. Some common hard commodities are precious metals, like gold, silver, and crude oil.
Soft Commodities – These commodities are grow products related to agriculture like cotton, coffee, corn, and livestock.
When trading commodities, one of the most important factors to consider is liquidity. High liquidity means there is a high supply and demand. Thus, traders can easily tell whether to sell or buy the commodities. A more liquid market is usually considered to have less risk as the chances of someone willing to take the other position are higher. If a demand for a commodity goes up, so will the price and vice versa. Additionally, if there is a drop in the supply, the price will go up. If there is an increase in supply, the price will go down.
Some products can be affected by external factors which in turn will affect the stock and inventories. Weather, pandemics, staff issues, political or economic factors which can affect taxes, laws and government etc.
The nature affects the commodity prices greatly, especially the soft commodities as agricultural products are highly affected by weather. Favourable weather may result in a greater supply of a commodity than expected, which makes the price drop. Cold weather can result in an increased demand for energy products, which in turn increases the prices.
A commodity price usually changes in correspondence with inflation.
If a commodity is strongly connected to a currency, a change in this currency can affect the price of the commodity. Monitoring these connections are important when trading commodities.
Regions with a big uncertainty in the political situation can affect the commodities if they are produced in these regions.
The wealth of a country can also plays a role in the price of a commodity. If a country is a major producer or buyer of a commodity, the wealth of the country can affect the price of the commodity as the purchasing power of the population is directly related to this.
There are many ways to trade a commodity, with us you can trade a commodity as a CFD - a Contract For Difference - which means that you speculate on the movement of the price of the commodity and have the possibility to trade either long or short depending on in what way you think the price movement will go.