Finance

Commodities Trading Explained

Commodity trading or commodities trading as basically referred to as a type of investment strategy that involves a series of purchasing and selling of goods that are considered as commodities.

What is a commodity? A commodity is looked upon as something that is of value, has consistent quality, and is normally produced in bulk by a large chain of manufacturers. Perhaps, a commodity is the opposite of necessity. A necessity is a need; something that people should have in order to sustain the quality of their lives such as food, clothing, water, and shelter. A commodity, on the other hand, is something that people do not necessarily need but are willing to invest on since they believe that it gives them a sense of satisfaction and pride. Examples of commodities are goods, services, cars, and other valuable products.

Commodity trading refers to buying and selling commodity futures–contracts about a delivery of commodities. The most popular commodity futures are oil, natural gas, gold and wheat futures etc.

Individuals can trade commodity futures through a brokerage firm that executes clients’ orders to buy or sell certain commodity futures either on organized exchanges such as MCX & NCDEX.
Buying and selling commodity futures within a one-day time frame is called day trading or intraday trading.

Point to Remember:

  • Keep Watching Demand Factors
  • Keep Watching Supply Factors
  • Keep Watching Technical Analysis
  • Keep Watching Developments in Other Financial Markets

These are the main factors to keep in mind before buying and selling commodity futures.

In a commodity exchange, everyone is free to sell and buy products. As with anything else, prices vary depending on the supply and demand for a certain commodity. Think of this as an example: The given commodity is tobacco. If a country’s largest tobacco field gets wiped out by a natural disaster, the remaining tobacco resources would definitely have a higher demand and a drastic increase in price. But of course, to start trading commodities you’ll need a reliable commodities trading platform, such as IronFX. IronFX is an award winning platform where you can trade almost any of the commodities, since they have ten trading platforms where you can choose to trade Forex, cryptocurrencies, futures, precious metals and much, much more.

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