Commodity Trading Explained
A key to successful commodity trading is a good understanding of the product or asset being traded. Because commodity trading involves a wide variety of goods to choose from, it is very likely that you will find a specific product that you are already familiar with.
For instance, you probably consume cooking oil and coffee on a daily basis, and you have a pretty good idea on how these products are produced and what they are used for. This is definitely a good thing because when you trade in commodities, it is a big advantage if you understand and know a lot about the product you are trading.
As mentioned there are also lots of other assets and exclusive commodities you can choose to trade with, including precious metals like gold and silver. You will do well as long as you have a good grasp of the factors that affect their prices.
While the big number of assets available for commodity trading is what makes the strategy attractive to investors, it can also be counterproductive. For one, people tend to get overwhelmed when presented with a massive amount of choices. Choosing the right commodity to trade can sometimes be confusing.
When choosing the asset to invest in, a good tip to keep in mind is to go for the more popular commodities. After all, they are popular for a reason – other investors find them interesting and profitable. These commodities are preferred investments in practically all parts of the globe. While the trading markets are volatile, and the trading volumes are constantly changing, these commodities always manage to be at the top of the list, albeit in changing order.
Having said that, here are 10 of the best commodities for trading to help make the decision-making process easier for you:
The commodity is an important part of modern society. Everyone uses it – from households to industries. It has become a fixture in practically all aspects of life. Thus, crude oil price can have a tremendous effect on people and industries. Huge amounts of oil are produced on a daily basis to meet the massive demand. While this commodity is comparatively new, it has become one of the most important and influential among all commodities on the market today. However, it also has a tendency to be damaging.
Coffee is among the oldest commodities on the market, and it is also one of the most traded. Next, only to water and tea, coffee is considered as the world’s third most consumed and most popular drink. Millions of people all over the world drink coffee daily. Research reveals that Sweden and the Netherlands are the world leaders in coffee consumption.
After oil and coal, natural gas is the next most used fuel source in the world. This makes the product a very popular commodity on the market. Similar to oil, natural gas has myriads of uses. Despite the fact that some global market forces try to limit natural gas consumption, it has remained a popular asset for commodity trading. Being one of the by-products of oil-drilling has also contributed to the popularity of natural oil in the commodity trading market.
For many centuries now, gold has remained as one of the world’s most influential commodities on the trading market. The precious metal was used in the past as a medium of exchange in many countries in the world. It later evolved into a standard that insured modern currencies. In many cultures today, gold is still considered a symbol of wealth. It is therefore not difficult to understand why this precious metal is among the most sought-after commodities on the market, and one of the most frequently-traded.
Also known as Brent crude, Brent oil is considered as the best oil produced in the entire continent of Europe. Sourced in the North Sea, one of the major distinguishing features of Brent crude is that it i