If you’re already an investor, commodity trading can serve to diversify your portfolio. Commodities can be anything from oil to gold or silver to coffee, sugar and wheat.
Unlike certain investments, commodities can hold and gain value over time. They can also be less risky. You’re not buying an intangible asset, but something tangible that can gain or lose value.
What Is Futures Trading?
Commodity trading is also called futures trading. Futures trading runs through a contract agreement between a buyer and seller, where there is a specified future date and price the commodity will trade at.
This allows futures investors to predict a commodity’s direction. Futures contracts got their start in the agriculture industry, allowing farmers to hedge against changes in the prices of crops or animals with commodities such as livestock and grains. Today, futures trading includes a variety of industries and is most popular among precious metals, industrial metals, energy, bonds, and stocks.
A clear benefit of trading futures is that the commodity may fluctuate in value, but this value is always present. It’s not possible for a commodity to drop to zero value. A futures contract is a leveraged investment, which means that you can expose yourself to a greater value of stocks. Futures markets are also very liquid and contracts are traded in huge numbers on a daily basis.
Where To Start
The first place to start with commodity trading is to choose a commodity broker. These are versatile trading platforms where you can access statistics, data, and other useful features. This includes charts, quotes, and strategy mapping tools.
To start trading, you’ll need to open an account. First, submit commodities account paperwork. This form will verify your understanding of the risks in trading commodities. It will also verify your financial information. commodities are often leveraged against your existing assets.
How to Start
Before you start trading online commodities, you will need to fund your account. The funding size required differs depending on your broker. You should also consider the level of risk you are willing to accept. To be more effective with your online investments, you also need to develop a researched trading plan. Many commodity brokers have simulation environments where you can practice commodity trading, rather than practicing in a live investment scenario.
Commodity trading is a great way to take investment portfolio to a new level. It offers some benefits that stock investments, real estate, and many other opportunities do not provide.