What Is Commodity Trading? (Part I)
Do you like commodity trading? Commodity trading presents both challenges and opportunities. There are 32 tradable commodities to be exact. In the beginning chances are you will be overwhelmed by the number of tradable commodities to choose from. Commodities markets are both broad and deep.
How are you going to decide that you want to trade gold or crude oil, natural gas or frozen concentrated orange juice, soybeans or aluminum, silver or palladium? What about corn, feeder, cattle or copper?
Much of what happens in the world-from your home mortgage loan to your job depends on the global oil prices and the interest rates. If the oil prices go up, the central banks are forced to raise the interest rates to fight inflation. Do you remember the sudden spike in oil prices from around $60 to $145 during the summer of 2008?
Just because the global economy has gone into a recession, the demand for oil has decreased. But once the global economy starts to expand again, oil demand will again go up. This can happen again, be ready.
Should you trade commodities futures, or get stocks of companies dealing with commodities like Exxon Mobil or Starbucks or invest in ETFs or commodities mutual funds. How do you know what is the best way to invest in commodities? So how do you decide which commodity to trade? Just getting started in commodity trading can be daunting.
There are many ways of investing in commodity trading. As there are many commodity futures contracts that are traded on various exchanges, a lot of investors think that commodity trading is synonymous with futures trading. You should know that futures trading is not the only one way of getting involved in commodity trading.
Between 2001 and 2006, oil, gold, copper and silver all hit an all time high. Many other commodities reached an oil time high. The prices are down now somewhat due to the global recession. Many analysts are of the opinion with the end of global recession the prices of most of the commodities will skyrocket. Do you know that the 21st century is the century of commodity trading?
Due to some fundamental factors like the global population explosion, urbanization and the industrialization of the emerging market economies like Brazil, India and China (BRIC), a long term cyclical bull market in commodities is expected during the first part of the 21st century.
Commodities are poised for a rally that will last long in the 21st century. Gold prices are still going higher and higher. However, it doesnt mean that there will be no minor downturns like that in the present due to the recession.
Wealthy investors are taking refuge in gold due to the financial crisis and weakness of US Dollar. Do you want to ride the trend in the gold market? Countries like China, India, Russia etc are buying gold in the open markets that is driving the gold prices higher and higher. You maybe already late!
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading commodities and currencies. Trade Dow Futures. Learn Candlestick Charting!
