How to Start Commodity Trading

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Commodity Trading involves trading in various types of commodities. Some of these commodities are food, energy and mineral products. Others include precious metals, like gold and silver. When you begin, you must learn about the market and understand the different factors that affect its prices. Before entering the market, start with small amounts of money, and use risk management orders to limit your risks.

Commodity futures contracts can be very profitable. You can speculate on prices of certain commodities, such as corn, by buying or selling futures contracts. These contracts are traded on commodity exchanges such as the New York and Chicago Mercantile Exchanges. The price of a commodity can change wildly in a short period of time.

The price of a commodity depends on how readily it can be traded. Some commodities are produced in large quantities and are used in various industries. Others, like oil, are used to produce a specific product. These commodities are then sold to manufacturers and consumers. By using futures contracts, commodity traders can develop new trading strategies. In addition, futures contracts give buyers and sellers more flexibility in setting prices and reducing the risk of price fluctuations and international conflicts.

Another way to trade commodities is through stocks. Stocks are easier to trade than commodities, and most investors already have brokerage accounts. Moreover, stocks are widely liquid. While stocks are never pure plays on commodity prices, they may be influenced by other factors.

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