Commodity trading is a type of trading that focuses on investing in physical products such as gold and oil. Commodity trading is quite similar to stock trading. The only difference is that in commodity trading, assets such as gold and oil are traded as opposed to selling companies shares as it is usually the case with stock trading. Commodity traders usually deal with raw materials that are used in the beginning of production process such as grains used in production of animal feed or copper used in construction industry. The main objective of a commodity trader is to secure the best price for the producer while at the same time ensuring that they supply quality products to consumer at a competitive price. The profit margin that a trader usually get is quite slim when compared to other industries. That means that volume of transactions made plays a huge role in determining the overall success a trader.
Unlike the past where commodity trading was purely and off-line business, nowadays, more and more brokers are allowing their clients to trade commodities online. Thanks to advance in technology, brokers are using advance trading tools to give real time updates that are accurate to their clients. They also give real time reports. However, just like any other industry, poker domino investing in commodity trading online has its own risks and benefit. In this section, we are going to discuss both the benefits and risk of investing in commodity trading online to help you make an informed decision.
Benefits of investing in commodity trading online
1. High growth
Over the last decade, the demand for commodities has significantly increased. This has also lead to drastic increase in prices. The high growth that the commodity trading market is currently experiencing has provided good opportunity for traders to make good income within a short period of time.
2. Access to information
Commodity trading online is fast becoming more and more popular because traders now have access to well researched information to help them make good judgment when investing in commodities. Some of the tools that traders are currently accessing include live market quotes, analytical charts, live reports on commodities among many others. This has helped them make informed decision when investing in different commodities. As a result, they have managed to lower risks involved in trading and increase profit margin.
Also Read: How to Trade Crude Oil Online on a Forex CFDs Platform
3. Security against inflation
Any stock trader will tell you that inflation is a bad thing because it lowers their bond and stock investment profit. However, that is not the case with commodity trading. In time of inflation, commodity traders usually smile all the way to the bank. This is because when the price of goods and services rise, the value of commodities used to produce those goods and services as rise. As a result, commodities traders rip big when there is upswing in the market.
4. Higher returns
There is no doubt that investing in commodities involve huge risk because of price fluctuation. High price fluctuation means that you get to make huge profits or losses. If you understand the market well and make the right decision at the right time, then you make huge profits.
Risk involved in commodity trading
Just like any other form of investment, there are some risks involved when investing commodity trading online as discussed below.