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- How to Start Trading Commodities
How to Start Trading Commodities - Commodity Trading Strategies
Commodity trading has an ancient history and is extremely widespread around the globe. The commodity trade began to sparkle with new colors when the Chicago Board of Trade was established in 1848. Nowadays it is one of the most popular types of markets to trade. There are 2 kinds of commodities: agricultural, or soft (that are grown) and industrial, or hard (that are mined). Agricultural commodities include coffee, wheat, corn, cotton, live cattle, lean hog and so on. Energy products (gas, oil), base and precious metals, diamonds are considered as industrial commodities. Often, cryptocurrencies are also referred to the commodity market, since investors sometimes consider them as an alternative to material commodities, in addition, the cryptocurrency market is not regulated externally, but depends only on market changes.
How to Trade Commodities
So, what to consider when trading in commodity markets? Here are some steps you can have a look at.
1. Choose the Commodity Market
Determine for yourself what commodity to trade: Crude Oil (ex. Brent, WTI), Natural Gas, Cocoa, Orange Juice, Wheat, Soybeans, Live Cattle, Gold, Copper etc. Chose a commodity you’re interested in the most and investigate that commodity market closely.
2. Open a Trading Account and Choose a Trading Platform
Open an account with IFC Markets to start your awesome trading on one of 3 offered platforms: MetaTrader 4, MetaTrader 5 and NetTradeX. By the way, NetTradeX is a unique innovative platform designed to allow our customers create their own instruments.
3. Use Technical Analysis and Track Commodities Price Charts
This analytical toolkit will be useful for both experienced and novice traders. Use our daily Technical and Fundamental Analysis to make your trading easier. Price Charts are made to provide traders with the historical movements of the market and allow to track real-time commodity prices.
4. Choose a Commodity Trading Strategy you Will Stick to
Since types of commodities and factors influencing their demand/supply and therefore prices are various, there is no universal strategy for trading commodities online. Study the most popular techniques and select the most suitable one. Consider your interests, awareness of chosen commodity market movements, time you’re ready to spend on trading commodity online and the money you can invest in such trading.
5. Decide How Much to Invest in Commodities
Trading wisely and following Risk and Money Management principles can help you to earn money and lower the risks that are present at any type of markets without exceptions. Take into account selected commodity volatility level, your personal incomes and expenses, set commodity investing goals in long and short run.
6. Check the Status of Your Order
After opening a position, you need to keep your eye on it most of the time. And in order to lessen the risks you can use many trading orders, such as Stop loss, Take profit, Trailing Stop and so on. They are called to help traders make decisions beforehand and not to lose all the funds if something goes wrong.
Commodity Trading Strategies
Trading commodities is not the same as trading stocks or currency pairs, so before starting it each trader needs to explore the market closely and take into account all the factors that can affect the selected commodity quotes. IFC Markets offers its clients various ways to trade commodities, such as trading continuous CFDs on commodities, CDFs on commodity futures. In any case a trader should develop and adhere to some determined trading strategy to get success. Remember, that you need to master the strategy you choose, which means losses may happen in the beginning, but that will help you improve your technique and not lose in the future.
We made a list of a few commodity trading strategies that you can go through and pick the most suitable one.
- Go with the trend.One of the most proven and effective ways to trade is to follow the trend. This strategy works extremely well in the commodity market.
- Seasonal trading. Commodities are material and commonly used in our everyday life, most of them are grown (agricultural commodities, ex. corn, soy, lean hog, live cattle, cotton and so on),therefore they are subject to seasonal influences. If a trader understands the seasonal patterns of commodities traded, he will know better when to go long or short.
- Scalping. The scalping strategy lets a trader get minor profits from insignificant price movements. When scalping a trader gets really small profit per deal, but while increasing the amount of successful deals to 50-100 or more, he/she actually boosts the total profit.
- Focusing on supply and demand.As known, commodity market is driven by supply/demand ratio balance. If for some reasons (disaster, drought, war, disease, global political changes etc.) the supply declines, it means growing prices. And vice versa, when the supply of a certain commodity rises and the demand goes down, the prices will fall. Following all these events and factors allows trader to buy and sell commodities more wisely and get profit, not losses.
However, commodity trading strategies cannot guarantee you 100% successful trading as there are always factors that wouldn’t be taken into account. But they will surely reduce your risks when trading in the world commodity market.
What is Commodity Trading
Actually, what is commodity trading? This brief guidance is designed to help you start trading commodities online, as well as identify and catch strong trends to make more profits.
What is Commodity
What is commodity itself? It is a raw material or a basic good that is used in trading. Commodities are interchangeable and standardised. There are plenty of factors influencing commodity prices, as their majority is highly dependent on weather, war, government intervention and laws, diseases. Changes in supply and demand usually have great impact on commodity prices, also. However, as a rule, commodities are used to diversify the portfolio to be less at risk, as during high volatility times traders consider some of them (gold, oil) as safe haven for their funds.
