Commodity trading is buying and selling commodities, like gold or oil. Commodities are raw materials with a known price that are converted into products such as food, clothing and electronics. Trading commodities online allows investors to buy and sell these resources in real time, which can help them make money if they predict an increase or decrease in prices over time. This guide covers everything you need to know about commodities trading online.
What Are Commodities?
Commodities are primary goods used in business that are interchangeable with similar commodities. Examples of commodities include gold, silver, oil, coffee, corn and wheat. Commodities are bought and sold on markets around the world.
Types of Online Commodities Trading
The 2 main types of commodity trading are:
- Spot Trading – The buying and selling of commodities for immediate delivery. This is the most common type of commodity transaction, which involves buying and selling a physical item like gold or silver bullion on an exchange at current market prices.
- Futures Trading – A contract to buy or sell an asset at a specific price on a set date in the future, often referred to as “going long” or “going short.” Futures contracts are used by farmers and others who wish to lock in future prices for their goods before they harvest them or mine them out of the ground. Investors who want to speculate on rising or falling prices without having to take possession of any physical good themselves (known as going ‘naked’) also use them.
The Advantages of Trading Online
Trading commodities online has several advantages over trading in a physical location.
- You don’t need to travel to a physical location or meet with a broker. It’s possible to trade commodities from anywhere, at any time of day or night. You can even trade from your mobile device if you want!
- Trading commodities online allows you to be more flexible regarding when and how much time you spend on the market. The key is that you have more control over these things than traditional buying and selling methods, which are usually limited by regulations requiring brokers’ intervention for every transaction.
Online Commodity Trading Tools
There are many different types of online commodity trading tools available to you. Some of the most popular include:
- Charts and news and analysis: With these, you can keep track of the prices of commodities in real time and use that information to make informed decisions about when to buy or sell.
- Order types and trading alerts: These allow you to customise your order in various ways before submitting it for execution. For example, if you want to buy only when a specific price has been reached by a certain amount, then this type of alert would let you do so automatically when such conditions are met (with no need for intervention from yourself).
- Price alerts: These notify traders whenever there is an uptick or downturn in any given commodity stock at its current price level. They are helpful because they keep them informed without having them constantly check their accounts every few minutes while they’re working on other things online. Instead, they receive notifications only when something significant happens during their absence — saving money (not wasting electricity) and time spent away from other tasks.
Tips for Choosing an Online Platform for Commodity Trading
Choosing a platform for commodities trading online is not as easy as it might seem. After all, there are so many platforms to choose from, and it’s hard to know which ones offer the most benefits. Here are some things to keep in mind when you’re looking at different platforms:
- Look for a platform that offers a wide range of commodity options. You’ll want to be able to trade everything from oil and gas (the most popular commodities) to gold, metals, agricultural products and more. Look for one that lets you trade multiple types of futures and options with no restrictions or limits on how much money you can invest or lose per trade.
- Choose an online broker who offers low minimum deposits required by your bank account so that it doesn’t impact your cash flow too much during regular business hours.