Want to know how to trade commodities? This guide is for you! Learn all about the exciting world of commodity trading from the comfort of your own home and start profiting from the financial markets.
Whether you are a novice or a professional, this insightful guide will give you the knowledge you need to succeed in the volatile but potentially lucrative commodities market.
How to Trade Commodities: A Thrilling Journey into the Market
Oil prices dropped around 1% to a seven-week low on Tuesday as worries about shrinking demand from China and a firmer US dollar saw crude extend losses, while concerns that OPEC+ might raise output in the coming months eased.
Brent futures for September delivery dropped $1.01, or 1.3%, to $78.77 a barrel by 12:21 p.m. EDT (1621 GMT), putting it on course to post its lowest close since 5 June.
WTI futures fell 86 cents, or 1.1%, to $74.95, putting it on track for its lowest close since 5 June.
Both technically oversold territory for a second day. Along with crude, U.S. futures for diesel and gasoline also traded at their lowest levels since early June.
The world’s biggest crude importer, China, has been an ongoing worry for commodity markets with a raft of poor economic indicators this summer. Reuters polls pegged July’s manufacturing activity to have contracted for a third month
‘Weakening global demand growth, an unresolved economic outlook in China and still-elevated global oil inventories are continuing to weigh on prices,’ wrote Claudio Galimberti of the consultancy Rystad Energy.
Chinese leaders’ promises to boost support for the economy fall short of expectations, as little progress in policy details has been made since a Third Plenum policy meeting simply reiterated ‘old’ economic policy goals.
Before the U.S. Federal Reserve’s policy meeting on July 30 – 31, which will scrutinise any new clues on a September rate cut – the dollar (.DXY) rose to a two-week high versus a basket of other currencies.
In July, the Fed’s benchmark overnight rate will likely be left unchanged and the central bank will foreshadow rate cuts that might start already at its September meeting.
The US central bank hiked rates in 2022 and 2023 to curb a spike in price growth. By raising borrowing costs for consumers and businesses, the Fed can push down economic growth and demand for oil.
A robust dollar can do the same thing by dampening demand for oil by making commodities priced in greenbacks, like crude, comparatively costlier for those holding other currencies.
This week, on Thursday, OPEC+, from its meeting in Vienna, top ministers from the Organization of the Petroleum Exporting Countries (OPEC) – plus allies such as Russia – will again review the market, including a slated plan to begin unwinding some output cuts from October. No changes are expected.
In the faltering OPEC-member Venezuela, the political opposition claimed to have won 73% of the vote in Sunday’s presidential election.
The country’s national electoral authority declared that the incumbent Nicolás Maduro won a second term in the presidential race.
The Organization of American States election observation department declared on Monday that it is ‘not possible to recognize the results issued by the national electoral council of Venezuela’.
‘A win for Nicolas Maduro in the Venezuelan election would be negative for global supply, as it would likely lead to tighter US sanctions,’ ANZ analysts said in a note. ‘This could cut Venezuela exports by 100,000-120,000 barrels per day.’
How to Trade Commodities: Understanding the Basics
The first step in learning how to trade commodities is to know what commodities are. Commodities are raw materials or agricultural goods that can be bought and sold, such as gold, oil, or wheat.
They are basic goods that are used all over the world, which is why the global economy relies on trade in commodities.
How to Trade Commodities: Choosing the Right Market
One of the most important steps when learning how to trade commodities is to choose the right market in which to trade. Many commodities are traded on a number of exchanges, such as the New York Mercantile Exchange (NYMEX), the Chicago Board of Trade (CBOT), and the London Metal Exchange (LME).
Some exchanges specialize in certain commodities, so the first thing you need to do is choose a commodity that you would like to trade, and then decide which market to trade it on.
How to Trade Commodities: Futures Contracts
The most common form of trading commodities is via futures contracts. Futures contracts are agreements to purchase or sell a certain amount of a commodity at a fixed price at a specified date in the future.
They allow traders to bet on the price of the commodity and also provide protection from movements in the prices of commodities.
How to Trade Commodities: Spot Markets
Another type of market that people use to trade commodities is the spot markets. In a spot market, a commodity is sold or bought with delivery due immediately.
This form of trading commodities consists of buying or selling the physical commodity, which is often more straightforward than futures contracts.
How to Trade Commodities: CFDs and ETFs
For those looking to trade without having to physically deal with the underlying goods, Contracts for Difference (CFDs) and Exchange-Traded Funds (ETFs) are great options. CFDs enable traders to speculate on price movements, without having to own the underlying good or commodity, while ETFs are investment funds tracking the price of a commodity or a basket of commodities.
How to Trade Commodities: Technical Analysis
Technical analysis is a necessary skill for those who want to master commodity trading. It involves analysing historical price data and the direction of the market to determine future price movements by using charts, moving averages, volume and other indicators.
How to Trade Commodities: Fundamental Analysis
Likewise, the most basic of fundamental analysis is used when learning how to trade commodities because it involves factors that make commodity prices go up or down. Commodities are influenced by the world’s supply and demand. Farmers must grow grains, cattle need to graze, and miners must mine.
However many factors can affect supply and demand. Economic indicators and geopolitical events can also have a major impact on commodity prices.
How to Trade Commodities: Risk Management
Having a good risk-management strategy is key when trading commodities. In short, the strategy for trading commodities is knowing how to “swing” with the market, and to develop a strategy for each commodity covered by your account.
This means having a strategy for dealing with risk, by means of stop-loss orders, diversification of your portfolio, and remaining informed about market conditions.
How to Trade Commodities: Leveraging Finxo Capital
Finxo Capital provides its users with an extremely powerful commodity trading platform that includes all the features and tools necessary to start or continue trading commodities easily and with professionalism.
How to Trade Commodities: Keeping Up with Market News
It is important to keep an eye on the latest market news and trends because any event or report could impact the price of commodities.
Finxo Capital acts as a one-stop-shop providing traders with real-time news updates and trend analysis.
How to Trade Commodities: Building a Trading Plan
A trading plan is essential, especially for a beginner who is learning to trade commodities. It should outline your trading objectives, risk tolerance, and position. This can help you to stay focused and avoid making foolish decisions.
How to Trade Commodities: Final Thoughts
Learn how to trade commodities and you can join the elite, navigate the global financial markets and making a fortune.
Armed with the right knowledge, tools, and strategy, you can cut through the noise and trade commodities with confidence. With the right approach – study, practice and focus – you can achieve your financial goals.
Start commodity trading today with Finxo Capital and experience the markets like never before.
