The Hidden Opportunities Behind Commodity Trading

Plenty of opportunity is there for short-term gains too, provided that a trader has solid fundamentals and understands how events can ripple through the market. Considering the objects of trading are physical goods such as energies and metals, market movements usually boil down to supply and demand. Both sellers and ultimate buyers are looking for stability in their investments, therefore pricing also comes down to supply and demand.

Traders can come across volatility in the commodities market if the scarcity or abundance of a commodity is affected by events like political turmoil, as is the case with crude oil. However, the market is still very much about the fundamentals: the spotting of long-term general trends that will drive up or down general market prices, and their interplay with short- and medium-term impacts, like the love-hate relation of the USD and gold. Gold is considered to be one of the oldest safe haven assets that investors can turn to when the currency markets are fluctuating.

Considerations making commodities a must-have in every trader’s portfolio

The first such consideration is one of the most overarching trends setting up commodities for a steady path in the long term: population growth. Population growth and growing industrialisation across the globe are setting up energy commodities, and not only, for growth. However, how this growing demand will be allocated among the different energy commodities – think fossil fuels and renewables, but also the varying options under both labels – and which particular commodity will be the largest winner, is anyone’s guess. Generally though, renewables seem like a safer bet while oil and gas will be subject to the contrasting influences of scarcity and fewer use cases as transportation is shifting towards electric vehicles.

Another consideration would be inflation hedging. Growth comes with inflation, which means the same amount of commodities or goods will be worth more currency at a later date. Thus, investors purchasing commodities directly and then selling them later can turn a pretty penny. Holding certain commodities for the long term (commodities with no expiry date) could be a smart use of a portion of one’s savings.

Last but not least, commodities are a valuable asset for portfolio diversification. The foreign exchange market, company stocks, or cryptocurrencies are all appealing to investors, but it is advisable not to keep all eggs in the same basket. Spreading investments across several asset types, and even several commodity types, could help ensure that one falling market does not bring the house down around the investor – while numbers in one market are in the red, good performance in others could balance out the losses.

Trading commodities in the form of CFDs

Besides the fact that commodities are an excellent way to diversify one’s portfolio, there are also an abundance of benefits to be considered when trading commodities in the form of CFDs (Contracts For Difference), as compared to other means to access this market. Buying or selling a CFD of a certain commodity is equivalent to buying or selling a certain amount of the commodity, thus speculating on the price movement, without having to deal with taking ownership of the physical commodity itself. As opposed to trading the commodities physically, CFD trading enables you to speculate on price movements in either direction, which allows you to trade on markets that are heading down as well as up. The other advantage is that you will need a fraction of the amount you would need to buy the commodity itself because CFDs come with high leverage which maximises your buying power. Some of the other advantages of trading CFDs are instant access to the market through one digital platform on a PC or even a smartphone, and ultra-fast execution with low or no fees.

CFDs trading with unlimited leverage

Multi-asset broker Exness offers CFD trading on a variety of commodities, namely precious metals such as gold and silver, and energies like crude oil, giving investors the opportunity to trade commodities online at the market’s best prices and with extremely low trading costs. According to Exness, portfolio diversification is absolutely essential for every investor and our diverse product offering stands as a testimony to it. In addition to offering CFD trading on commodities, the broker also offers CFD trading on stocks, indices, cryptocurrencies and currency pairs.

Exness is, to date, the only broker in the world to offer CFDs trading with unlimited leverage. This means that in addition to starting costs for trading being low and minimum deposit requirements non-existent, a trader has unlimited buying power regardless of their trading strategy and can tap into opportunities otherwise unimaginable to investors who don’t have huge sums of money to trade with. Losses can also be incurred as well as profits, this is why Exness offers a negative balance protection policy which makes sure that no trader ever loses more than they invested or enters a balance before zero.

Other benefits include around-the-clock access to the financial markets, a very wide variety of financial assets to choose from, the ability to take both long and short positions and the opportunity to make profit regardless of the market’s direction, and the abundance of risk management tools, such as Take Profit and Stop Loss – predefined parameters closing an order when it reaches a certain price, respectively either secure a profit or prevent a loss.

Aspiring traders need to know their commodities, their main supply and demand sources, and keep an eye out for anything that could alter the balance. Equally important is to make sure that this wealth of opportunities is tapped into through a regulated financial company.