Everything You Must Know About Commodity Trade: An A to Z Guide For Beginners

Commodity Trading

Authored by Athena Nagel

No doubt that trading has been a contemporary market term these days. However, the trading history dates back to the third millennial BC age, bringing a global connection. Surprisingly, trading has seen various evolutions and is still a vital part of the world’s economy. The versatile financial market has made trading everyone’s cup of tea. On the flip side, the risk factor within the market movements can draw people away from making a worthwhile investment. While stocks and share buying are often absurd, commodity buying acts as a stepping stone in the world of trade.

Commodity Trading

A Brief Introduction To Commodity Trading

Trading, by definition, is a concept that involves buying and selling goods in return for money(currency) or an equivalued good/service. Commodity trading falls in the latter category, where valuable commodities get exchanged. If you are into commodity buying, it becomes necessary to learn about commodity standards to understand which two weigh the same. Commodity trading usually entails buying or selling refined goods involved in product manufacture. Once you start trading commodities, you can build your asset portfolio.

How to land a foot in Commodity trading?

While price fluctuations are the typical risk factor in trading, commodity trade involves zero inflation, which makes it profitable even for beginners. Here is how you can dive into commodity trading,

  1. Understanding trade exchanges

A commodity trade exchange is a platform where traders who wish to buy or sell goods get matched rightly. Today, commodity buying can happen online, which has increased the number of commodity traders in the country. A recent survey from this year states that around 1.4 million Aussies hold online trade accounts.

Luckily, there are tonnes of safe online trading exchanges. Once you sign up for an account on a secured platform, you can find sell/buy orders. For instance, if you wish to buy crude oil and there is a trader who supposes to sell crude oil at the time, you receive a match!

  1. Consider investing in commodity stocks

If you are interested in exploring the commodity trade world, you can try investing in shares rather than merely raw materials. Reputed Commodity manufacturing companies willingly sell their shares and are open to investors. Unlike typical stocks and segments that can inflate and deviate depending on the company’s production rate, most commodity-producing brands are pretty safe from severe dips.

It’s because such companies have high-demand buyers keeping the sale at least in a mid-high position.

You can also invest in futures contracts, especially when you have a brokerage account. For traders who own a related commodity company, buying future commodities over stocks is a sensible choice.

  1. Comprehending trade instruments

After creating an account in an exchange, skimming across the page will make you understand that there are more than a hundred different commodities. However, these commodities are broadly classified into two classes as soft and hard commodities.

The two categories of commodities work differently and move in a distinct money path. So once you decide on what goods/services you’ll start trading, get to know the previous prices, movements, and historical trends to ensure you make the best bet.

  1. Make a minimal investment

No doubt that commodity trading has several benefits over stock trading. Though commodity buying seems exciting, it is always right to start by investing small. Always keep in mind to have a small segment of the contract cost value in your account to do some quick trading. Minimal trade investments can protect you from close margin calls which can be tragic for beginners. Also, since commodity trading allows diversification, you can stay away from the concentration of investments when there are margin calls.


Leave a Reply

Your email address will not be published. Required fields are marked *