Commodities are an essential part of our daily living. Sometimes you think you’re not using any of them (oil, gold, silver, etc) but they affect you all the time. A huge number of economic changes can affect a person who trades commodities, too. For example, having an increase in crude oil prices will surely affect no just a commodity trader but also anyone who owns and drives a car.
However, commodities are not just meant to be consumed in our daily lives. Traders can also use them for their portfolio diversification. If you’re planning to become a trader, you can choose to trade Cryptocurrencies Bitcoin News commodities for either the long term or for the short term.
During the past, commodity trading was off the radar of many traders because it costs too much money and time and it requires a lot of experience. On the other hand, in this day and age, there are several routes you can take in order to participate in the commodity markets. Some of these methods can make it easy even for non-professional traders to take part in the market.
Several commodity exchanges might have gone out of business or have merged with other companies. However, that does not mean that there are no more platforms available for those people who are interested in trading commodities.
There are still a lot of Cryptocurrencies Blockchain News commodity exchanges from around the world.
Most of such exchanges provide different commodities and usually offer and specialize on a single group of commodities.
Some of the most well-known exchanges in the United States are those that are run and operated by CME Group, which was the result of a merger between the Chicago Mercantile Exchange and Chicago Board of Trade in 2006.
Additionally, there’s the Intercontinental Exchange. In London, they have the London Metal Exchange, obviously specializing in precious metals and metals commodities.
Types of Commodities
There are currently 4 categories of tradable commodities. They include:
- Metals, among which are gold, silver, platinum, and copper.
- Livestock and meat, among which are hogs, pork bellies, live cattle, and feeder cattle.
- Energy, among which are crude oil, heating oil, natural gas, and gasoline.
- Agricultural, among which are corn, soy beans, wheat, rice, cocoa, coffee, cotton, and sugar.
A huge portion of the trading and investing population consider commodities are risky assets because they use futures contracts as a method of investment. In futures contracts, you will seal a deal to buy or sell in the future a predetermined amount of commodity at a predetermined price. Every category of commodities can be trade via futures contracts, which are a kind of derivative.
If you are mostly a speculator or an institutional investor or a commercial user of the commodity, then you might enjoy a lot of advantages in this field.
Most of the commodity futures traders are manufacturers and service providers. They mostly participate in this kind of trading in order to sidestep market volatility in commodities such as crude oil and gasoline.