Commodity trading is one of the most important types of trading in the stock market, and it depends mainly on buying basic commodities with the aim of investing in them and making profits from price changes. You must have heard before about the trading of currencies, stocks and metals, all of which are successful and profitable investments. However, even commodity trading can be a unique and great way to invest your money and make good profits if you enter trades at the right time.
What commodities can be traded?
There are many commodities on the stock exchange that you can invest in. Among these commodities are oil, natural gas, copper, aluminum, zinc, gold, silver, cotton, spices, edible oils, coffee, sugar and many more. These commodities are among the most important items needed by the global economy and are in great demand from consumers around the world. Choosing the right commodity to trade is a daunting task that requires knowledge of many global political factors and events.
How do you get started in commodity trading?
Getting started in commodity trading requires following several steps, which we put in your hands in the following lines:
Opening a demat account:
Like stock trading, commodity trading requires a demat account which is opened via a financial broker that will place your buy and sell orders. First, try to gather as much information as possible about all the available brokers and choose the right broker for you based on credibility and the commissions it charges on profits and earnings. Your broker should also provide you with trade entry and exit recommendations and signals to help you trade in good times and get out of the market in times of price volatility.
Most of the trading brokers provide economic experts who study the market and keep track of all the events that can affect the prices of commodities. Signals and signals are sent to registered traders via email. We do not advise you to apply trading signals and signals directly, but you should analyze the market yourself and compare your expectations with the recommendations to get the full picture of the market.
2. Deposit an amount into your account:
As it is known, it is necessary to deposit an amount of money to trade commodities, which, using leverage, can enter a trade with times your investment, up to 1000 times. This helps increase the gains. But on the other hand, the available balance of your account will be deducted in the event the market rebounds and continues against your expectations, which makes the process very risky.
To be safe from the risks of market fluctuations, you should study the market in depth and learn all forms of analysis used by experts such as technical and fundamental analysis and stay informed of the latest developments in the international arena at the regional and international levels. In addition, you must know all about political and security tensions and their effects on the movement of goods between ports and airports.
Ways to invest in commodities:
direct investment:
You can buy a certain amount of the commodity that you want to invest in directly from the market, keep it and then resell it again. For example, if you want to invest in gold, you can buy a piece of jewelry or an entire ounce. But you will face many problems if you choose this method of investing in commodities. You will have to store the gold you have purchased in a safe place and therefore it is vulnerable to theft at any moment. Also, this process requires a large capital investment and therefore a large number of traders wishing to invest in commodities will not be able to enter the market.
Buying stocks:
Buying stocks is a safe and profitable investment, but how can it be used to invest in commodities? Suppose you want to invest in an energy product such as oil or gas, you can invest in one of the energy companies with a global reputation. As soon as the prices of energy products rise, the shares of energy companies will automatically rise with them. Even if energy prices drop, you can maintain the value of your investment because the large energy companies have always made a stable contribution even in difficult times.
Investing through mutual funds:
Many investment funds give you the opportunity to buy and sell some commodities electronically and keep them in your demat account. If you intend to invest in gold or silver then this is the ideal option because you will not have to think about how to store and secure the commodities.