Commodities are the new black!
In today’s era of 24/7 news, it is easier than ever before for online traders to profit from the ups and downs of the commodity markets.
Historically, commodity trading took places in town markets. People would exchange the valuables or crops they owned for ones that they wanted, for example a farmer may have traded wheat for sugar or gold coins. In today’s world, commodities may still be bought, sold and exchanged in shops and markets, but they are also popularly traded on a mass scale via online platforms.
So you want to join the informed group of traders who are buzzing from coffee and shining like silver? Read on for our top 5 tips on how to trade like the experts and make commodities work for you on the binary options platform.
- Familiarize yourself with the different commodities
Before you start trading, make sure you understand the variety of commodities available and the features that distinguish them. In general terms, commodities are the raw, material substances that we use and consume in daily life. They include soft commodities, namely agricultural goods like corn, sugar and coffee, and hard commodities, namely mined materials and metals like oil, gold and platinum. If you are new to commodity trading, start with the assets that you are familiar with.
- Follow the news and keep following
Sure, this may sound simple, but it’s going to give you a huge trading advantage. Don’t underestimate the value of following the market news! Since commodities are the assets that we use in everyday life, they are central to the world’s economy and are regularly featured on the news. This makes it easy for anyone with a smartphone to stay up-to-date with the latest trends and to follow the fundamental data that impacts each specific commodity. The quicker you can respond to a trend, the greater your chances of winning the trade.
- Get to grips with supply and demand
Supply and demand – that phrase beloved by economists. This is the most important influencing factor on the price of all commodities. If there is an increase in supply and/or a decrease in demand of any commodity, its value will decrease. If there is a decrease in supply and/or an increase in demand of any commodity, its value will increase. This is why commodity trading is ideally suited to the binary options platform: you simply need to determine the up or down direction to place a successful trade.
Be sure to research the factors that are behind supply and demand before you start a trading session. These factors can range from political elections to unexpected weather and to up and coming markets.
Test yourself on the examples below:
– A terrible drought in Brazil, the world’s largest coffee bean grower, will reduce the global supply of coffee. Should you trade coffee up or down?
– Emerging economies such as China are continuing to industrialize and the growing middle class means an increase in demand for food supplies like sugar. Should you trade sugar up or down?
– Investments in water and wind energies are paying off and so the demand for oil is set to decrease. Should you trade oil up or down?
Here are the answers:
* Lower coffee supply -> higher coffee prices
* Higher demand for sugar -> higher sugar prices
* Lower demand for oil -> lower oil prices
- Know the relationships between assets
By trading on a binary options platform, rather than a commodities-only exchange, you can take advantage of the strong relationships that exist between various commodities and other asset groups. So with just one bit of news and research, you can place two or three different trades, and increase your profit potential two or three times over. Consider oil. This is Canada’s biggest export, and therefore when the price of oil goes up, so does the value of the Canadian dollar. An informed trader (like yourself) could place an up trade on oil as well as a down trade on the USD/CAD. Remember here that the USD/CAD pair goes down when the CAD goes up.
With the above tips at the ready, it’s time to start trading commodities. The beauty of commodity trading is that it really is accessible and rewarding. Just do your research and analysis correctly, and you should be good to go like a pro.