Introduction

People depict trading as a platform to earn money and become rich, which only happens for the one who puts in the effort to attain. Trading is of many types, forex, stocks, bonds, commodities, and derivatives. Here we are going to discuss commodity trading, what it is, and how to do commodity trading.

Commodity trading

As like other trading markets, commodity trading also has two types: hard and soft, buying, and selling. Buying and selling come under raw commodities. Hard commodities are natural resources, and soft commodities are agricultural goods. These trades happen in separate exchanges and for each type of commodity, there are separate exchanges.

The world's most precious and valuable commodities are,

Platinum

Rhodium

Gold

Saffron, and much more.

Apart from this, there are different varieties of commodities related to agriculture and energy commodities.

Basics of trading

The commodity market is like the other markets; you can buy, sell, and trade different types of other commodities. You can do commodity trading in futures contract also. Before knowing about commodities, knowing how to trade; it is essential to know that the traders always choose commodity trading. Because it is mostly traded and has high liquidity.

How commodity trading works

Commodity trading has been prevailing for many years, and many products are there in commodity trading. Usually, the trader trades a commodity for future delivery and pays the required amount. The trader can receive profit only when the price rises between the purchase date and the delivery date; if not, the trader tends to lose money. The profound price change in the market can happen when there is less supply or more. The scarcity can lead to an increase in the price. Commodity trading is directly tied to supply and demand.

How to start commodity trading

It is good to start commodity trading once you learn what commodity is and how it works. Know your trading style and analyze the net worth what you are going to invest in. Choose the right commodity through which you can earn money. Choosing the type of commodity is more important than the amount you are going to invest. Know which commodities are surviving well in the market, so that you can invest in commodities which provide you profit.

The difference in demand

In commodity trading, the energy commodity trade can be affected by government policy. Agricultural commodities are affected by weather change. Usage of certain products may stop by considering the health factors; for example, since research shows the negative health effects of sugar, the usage and demand have decreased. Sometimes, certain agricultural goods become high demand, and the price arises. These are the basic things which happen in commodity trading. However, with trading commodity CFDs, profit is achievable from a falling market as well as a rising market.  

Commodity CFDs

Like other types of trading, CFD is between a trader and a broker. When it is CFD trading, you can speculate the changes in the market by not even owning the product. CFD trading is not said to be easy, but there are benefits like leverage, zero commission, and profits from the direction of the market.

Benefits of trading commodity CFDs

Negative Balance Protection

Spreads from 0 pips

The main benefit of the commodity when you are an investor,

High leverage

No manipulation

Benefit when you are an importer or exporter,

Hedge against price fluctuation

Conclusion

It is common to see people predicting the weather which costs them literally nothing. But isn’t it a bit weird to find traders carry out their trades just by predicting? The irony is, yes traders in fact do exactly that! Trading has become more speculative nowadays which is nothing but a recipe for failure.

Professional and tenured traders consider technical & fundamental factors and take trading decisions based on them. The most important trait a trader should have is the willingness to accept the market as it is and be flexible to take decisions accordingly. Due to impatience and the urge to make money, the good old-fashioned method of trading can be scarcely seen in practice. Here are 3 steps that can help you carry out trading the way you are supposed to.

GAIN RELEVANT KNOWLEDGE:

A blind perception of how a currency will move can do no good to your trading career. Going through financial blogs and newsletters are the only things that can help you gain an edge. Invest time to gain knowledge and learn as much as possible. Try to understand the fact that you cannot fight the markets and you have to go with the flow if you want to earn money.

DO SOME BACKGROUND WORK:

Make sure that the instrument you choose is currently doing well in the market. You definitely wouldn’t want to opt for an asset that does not yield any profit but only accumulates losses. Though the markets are completely volatile and unpredictable, doing some background work is far better than taking blind chances.

UNDERSTAND THE TREND:

This part could be slightly complicated but one of the greatest perks of understanding the market trend is your chances of success will be higher when you start to comprehend how the market functions. Spend some quality time to understand the market and how the trend works. Your success is directly proportional to your ability to adapt to the market conditions and act accordingly.

The Forex market is not a place where you can try your luck. You should remember that whatever strategy you learn or practice, it is the market that controls you and the sad part is there is nothing you can do about it. Taking blind chances without considering any of the market conditions is a complete waste of time and investment. So, it is better that you stop predicting and start forex trading. Do not try to change the market. Make the conditions favorable and see for yourself what real trading could do!

Traders often bloat with misconceptions as of which strategy would be the ideal one to trade with. The answer is, there is no ideal strategy. Strategies are what we traders build by ourselves to trade. Position trading is one such strategy like day trading which is being widely used by people all over the world. For those who are unfamiliar about position trading, let’s buckle up and get committed to learning some important position trading strategies.

THE BASICS - WHAT IS POSITION TRADING?

Position Trading is usually where a trader enters into a position, holds his instrument until he figures out the right time to sell it. The trade duration may last from several weeks to months, and sometimes, even years. A position trader’s greatest attribute is his patience which helps him stand against the market odds and gain profits.

CHOOSE THE RIGHT INSTRUMENT:-

Since you are about to enter into a position, choose the right instrument to stay on track. Before investing, get to know about the history of the instrument with the help of long-term charts, economic factors and predict where the price would reach after a certain period of time. If you think it might work, you can go ahead with the chosen instrument. It is important that you are strong in your position trading techniques and understand how to position trading works.

KNOW WHEN TO BUY OR SELL SHORT:-

Before entering into a position, make sure you do a thorough groundwork, a repeated number of times. Your chances of becoming a successful position trader will likely be higher if you have a good sense of foresight which can be acquired by updating yourself with the market news. Predicting the markets and trading with knowledgeable guesses will help you gain profits.

SET A STOP LOSS - THE LIFELINE TO YOUR TRADING CAREER:-

Certain economic, political factors and events could create a peak difference in the price of the instrument and the aftermath would be either pleasant or unpleasant. But, to be on the safer side, it is always better to set a stop loss to your deal. Stop-loss is a feature beyond which your deal doesn’t progress. When the specified target price is reached, the order gets executed minimizing your losses and acts a shield to your career.

GOOD ‘TIL CANCELLED (GTC):-

Position trading requires less effort when compared to other trading strategies. Once you enter into a position, you wait till the instrument reaches the expected price and execute the trade. But monitoring the price fluctuations continuously could be a tiring process. GTC helps you fix the desired price and automatically executes the trade once the target has been reached thus making the overall trading process more comfortable. Manual execution can also be done if you are satisfied with the current price of the instrument.

RISKS INVOLVED IN POSITION TRADING:-

Minor fluctuations that occur in the price of the instrument does not create sensations among position traders. But what if a trend reversal occurs and the market goes against you? Though stop loss if implemented would minimize the losses, it could be a disheartening event for a position trader. Good knowledge and a well-predicted trade deal would avoid all mishaps and losses.

Position trading strategy, one of the best trading strategy can help you earn profits amidst the wild volatile market. Using proper risk management factors and going with the market trends can help you survive in the market.