Best Commodity Trading in June 2022

Commodity trading is a lucrative business plan. With the right knowledge, you can make money by buying and selling products in bulk. You'll be able to buy items at low prices and sell them for higher prices. Learn more about commodity trading by signing up on a platform today!

updated May 18, 2022 11:48 AM

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1

eToro logo

eToro

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4.7/5

4,814 reviews

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Android Mobile App

2

IG Commodities Trading logo

IG Commodities Trading

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3.8/5

2,017 reviews

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3

Plus500 logo

Plus500

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3.8/5

4,452 reviews

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4

FP Markets logo

FP Markets

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3.6/5

119 reviews

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5

Ava Trade logo

Ava Trade

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3.6/5

2,784 reviews

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6

Cannon Trading logo

Cannon Trading

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3.5/5

16 reviews

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7

Axi logo

Axi

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3.4/5

19 reviews

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8

TeleTrade logo

TeleTrade

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3.4/5

20 reviews

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9

Dhani Stocks logo

Dhani Stocks

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3.3/5

3,226 reviews

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10

OANDA logo

OANDA

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3.3/5

399 reviews

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Frequently Asked Questions

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What is commodity trading?

Jobs and businesses are not the only means to make a buck. With all assets going digital, there's no reason why you shouldn't join the crowd. Commodity trading uses the basic principles of commodity exchange. Thus, trading is easy. Through the platforms, you can trade on the price movements of commodity assets like oil, gas, and agricultural products.

Why do you need commodity trading?

Commodity trading helps you level up your digital trading game. It steers you away from the usual stocks, bonds, and security investments. But aside from giving you great additions to your portfolio, commodity trading has more benefits you’ll love to know. Here are some of the ways it can spice up your trade.

Diversified Assets

Commodity trading is an excellent way to diversify assets. Because commodity prices move at a different pace than stocks, you can recover during market volatility. For instance, if you'll invest solely in stocks and the market goes volatile, your stock prices will drop, leaving you at a loss. However, if you invest in a combination of stocks and commodities, the mix saves you when stock prices go low.

Safeguard Against Inflation

During inflation, the stock market becomes unpredictable. It can result in a decline in income stock. Customers' purchasing power decreases while commodity prices increase. If you invested in commodities before inflation, its price would have increased. Thus, you'll make a profit when you decide to sell it. Despite inflation or natural disasters, your overall loss will remain at a controllable level.

Minimized Event Risk

During natural disasters or economic crises, prices of commodities will go up. Trading commodities can help you leverage losses during price swings. You can lock the price for specific products by purchasing futures contracts. These contracts will obligate your seller to price the commodities at a particular range for a predetermined period. Once the prices go up due to unexpected circumstances, you are guaranteed to get the selling price at a minimum.

Market Transparency

Commodity trading is an extremely transparent process. Since there is large-scale participation for commodity transactions, the prices are open for everyone to see. Also, there are government agencies that foresee the selling and revenue generation for commodity trades. With this form of price surveillance, you're sure you won't be spending money on unfair deals. You just have to play your cards well to get the most out of your investment.

Profitable Returns

Commodity prices can have extreme highs and lows. Once the demand increases, the costs will soar up. By planning your investment right and purchasing commodities at the right time, you will surely reap profitable returns. The key here is pretty much the same as other digital asset trades, buying and selling at the right time. Once you master that and plan your investment right, commodity trading will be easy as pie.

Lower Margin Trade

Trading commodities usually require a margin deposit. Since this is an additional expense at your cost, it can chew down your trading capital. Unlike in other digital asset trades, the margin in commodity trading is significantly lower. Due to this type of trade’s uncomplicated principles, platforms and firms don't require a large margin. You get all the benefits for a fraction of a cost. Now that's a good deal.

High Liquidity

The liquidity of commodities is exceptionally high. Due to the high investment returns and easy trade, you won't have trouble selling your commodity assets later. Since the market has a high level of trading activity, it assures you that your investment will not go stale. Commodity assets' liquidity lets you get into and out of position easily when investing, giving you the utmost trading freedom.

What are the core features of commodity trading?

Commodity trading remains essential to maintain a healthy portfolio. It just has to be there to ensure optimum returns. Why do you think commodity assets are recommended investments during trying times? Here are some of the reasons:

Anonymity

Similar to other digital asset trades, online commodity trading is anonymous. Though a trading account is necessary, your personal information stays undisclosed during the commodity trade. Despite the presence of future contracts, the anonymity in commodity trading is still commendable. The futures will only specify the price and quantity of commodity assets, but it will not require your personal information.

Fast Execution

Fast execution is one of the key features of commodity futures trading. If you move slowly, you won't be able to catch the best opportunities in the market. Once the prices go down, you should quickly trade commodity futures, so you'll get the same amount during inflation. Through unique networks, platforms create ways to deliver information quickly to process transactions efficiently. You can buy and sell your commodity assets real-time—guaranteed.

Wide Range of Trading Instruments

Trading instruments are the different types of markets you can buy and sell in a commodity trading platform. Commodity traders have vast options of trading instruments to access commodity markets. For instance, they can use future contracts, swaps, Exchanged Traded Commodities (ETC), forward contracts, and many others. The wide range of trading instruments available in commodity trading keeps it active, which means high liquidity.

Futures-driven

Most commodity trading platforms are futures-driven since this is the most traded instrument. Though there are other choices, futures play a significant role in the movement of markets. Future contracts can dictate the price of commodity assets on a predetermined period, making it extremely powerful in establishing the rates. They are even used by speculators as a reference to make directional price bets. This reference will determine investment profitability.

Varying Minimum Tick Value

Tick value is a trading instrument's minimum price movement. It can go up and down, depending on the movement of the market. For instance, if a specific futures contract price is $2,550, but the minimum tick size is $2,600, the bidding should start at the tick size and not the actual contract price. This price-setting can be advantageous for the seller since the minimum bid helps eliminate profit loss in case of a price decline.

Trading Freedom

Most commodity assets can be freely bought and sold within a trading platform using the logic of supply and demand. The market is also highly liquid, which encourages continuous buying and selling activities. The encouraging nature of commodity trading platforms helps traders like you do transactions freely. While still abiding by the rules of the platform, you'll have full control over your investment.

What are the types of commodity trading?

There are four types of commodity trading. They differ based on the process and type of commodity assets exchanged. You have to know which type is right for your investment goals. Read below to know the type of commodity trading perfect for you.

Range Commodity Trading

In range commodity trading, you buy oversold assets at the support level when the prices are low and sell overbought assets when the prices are high. Traders here study the commodities' strength index, momentum, and charge rate to predict price changes. For instance, some markets can be overbought and oversold for long periods. This steadiness makes it difficult to determine changes, but with the right strategy, commodity trading can result in high returns.

Breakout Commodity Trading

Breakout commodity trading profits from short term transactions. Here, traders buy the assets before the price goes substantially higher and sells them before going extremely low. It is all about new highs and new lows. The main difference between this type of commodity trading from the others is that you don’t wait for substantial price increases and decreases. You are earning small profits every transaction to accumulate a significant amount later on.

Fundamental Commodity Trading

Fundamental commodity trading moves based on the expected price trends derived from observation and forecasts. Patience is needed here since you need to observe price movements for a long time. You won't buy and sell based on the usual highs and lows because you do a personal analysis of the trends. Thus, accurate observations vital to ensure gain and minimize losses. Trades here are seldom yet highly profitable.

Commodity Options Trading

Commodity options trading provides effective ways when trading futures contracts. It is the type of commodity trading used during times of extreme prices because it lets you capitalize on leverage while the risks are still manageable. Traders here have the right to buy and sell futures contracts at a stated strike price within a period. It is also best practiced with short calls wherein you purchase futures in the forecast that the prices will drop at any time.

Who Needs Commodity Trading?

Commodity trading is not restricted to digital trading experts. Anyone interested in digital assets can have a shot at commodity trading. Because most platforms offer comprehensive trading support, everyone can be a pro in no time. Read below to know some people who’ll surely fall in love with commodity trading.

Digital Asset Traders

If you're a digital asset trader who’s already familiar with digital assets, you'll find commodity trading a delight. You can now purchase digital commodity assets using simple yet essential principles. With the options available, you can go safe or take risks depending on your desired outcome. Investing in commodities also helps diversify your current portfolio. In case of high inflation or natural disasters, commodity assets will help you cope with your losses.

Aspiring Traders

If you're new with digital assets trading, commodity trading is for you. You can try breakout commodity trading to navigate your way through the process with just a small capital. Also, given the high liquidity of commodity assets, buying and selling are incredibly doable, no research required.

Bankers

Bankers should be the first ones to appreciate commodity trading. Given the significant returns and the safeguard it provides against inflation, commodity assets remain valuable investments. If you're a banker, you sure know the importance of investing wisely. Thus, you know that commodity trading is an excellent addition to your current investments because it will diversify your portfolio and provide you significantly higher profits than time deposits.

Passive Income Searchers

Do you have money sitting right in your bank account and wondering how to grow it? Why not try out commodity trading? It will help you get passive income with your existing money. You can ask help from commodity trading advisors to help you grow your portfolio and invest in both safe and high-return commodity assets. It will help you grow your money to have steady additions in your bank account.

Employees

Employees also need to learn commodity trading. Working a full-time job can be exhausting. Sometimes with the demands of work, it seems like you don't have the time for additional income. Commodity trading is here to help you. You can inquire with commodity trading firms. They usually have advisors who will help you grow your investment at a pace and risk you are comfortable with, so you don't need to stress out looking for a sideline to grow your savings.

Business Owners

Nothing beats a well-rounded source of funds. Instead of solely relying on business profits, why not invest in commodity assets? There are several platforms in the market that can help you start your trading journey easily. You can use your extra business profit with your first trade. With the vast profit opportunities that commodity trading can give you, you’ll have more chances to increase your working capital and grow your business.

What are the steps on how to trade commodities?
Step 1: Choose Your Market

The first step is to identify which market you want to invest in. You can choose from commodities such as oil, gold, natural gas, agriculture, etc. It is highly suggested that you invest in as many commodities as possible to minimize investment risks. If you have financial advisors, remember to ask them for a diverse investment portfolio.

Step 2: Decide Whether You'll Buy or Sell

This step includes the fundamental principle in commodity trading. Always check the market prices. Go long (buy) if you think the prices will go up and go short (sell) if you have a hunch that the prices will drop soon. The information you’ll get here together with your observation on the market trend is essential for your next move.

Step 3: Enter a Trade Size

Decide on the amount you'll invest in commodities. Always spread your investment wisely. Diversify your portfolio by spreading your investment on different commodities and digital assets to minimize risks. Having a well-spread investment will also minimize your losses.

Step 4: Manage Risks

Don't forget to select stop-loss orders for your investment. These orders guarantee to close out the trade at the price you specify when the market is not doing well. It will also help you minimize losses in cases of an extreme price drop.

Step 5: Monitor Position

Always monitor your position in the market. Observe the trends, so you can track potential profit or loss. Doing this will help you create accurate forecasts. It will also help you determine when to buy and when to sell your assets for a higher return.

What is a commodity trading company?

A commodity trading company transforms commodities to enhance its value. It also makes sure that significant risks are transferred to the financial market. Through diversification of commodity assets, the company ensures that the risks will be eliminated. Adding to that, commodity trading companies help you trade easily by providing the best prices for stocks on commodities such as precious metals, oils, and natural gas.

How do commodity trading companies work?

Commodity trading companies centrally manage all commodity trading activities. It includes selling and buying assets when they deem that the transaction will gain a profitable margin. These companies focus on investing in commodities such as oil, gold, and agricultural products. They rely on the fundamentals of supply and demand and other investment principles to grow your money. The main source of their profit here is the margin deposit.

How is physical commodity trading different from commodity trading online?

Physical commodity trading deals with the purchase of actual raw materials of a commodity. Here, you will look for a reputable supplier, buy, store, and deliver the items to different markets to earn a profit. On the other hand, online commodity trading deals with the purchase of future contracts and digital assets of commodities so you can sell them at a higher price later on. It works in the same way as mutual funds and other digital assets.

How do I earn money from commodity futures trading?

You earn money from commodity futures trading through the increase in commodity prices of previously purchased assets. Since futures lock the prices at a predetermined period, if you expect that the prices will go up, you can use a futures contract to lock the price. One great thing about commodity futures trading is that it gives you the right but not the obligation to purchase assets within the period.

What are commodity trading charts?

Commodity trading charts show the current futures and commodity prices in the market. It also offers the latest news and information about the commodity market, making them extremely useful in deciding whether you should buy or sell digital assets. You can also see financial indicators here to help you make accurate forecasts. There are free commodity trading charts you can check out on the internet to help you with your commodity trading journey.

How do I learn commodity trading?

Commodity trading uses the same fundamentals as mutual funds and other investments. You buy at low and sell on high. However, since this still involves shedding money, you may be hesitant to go all-out right away. Here are some ways you can learn commodity trading:

Commodity Trading Advisors

Don’t worry because most commodity trading firms have commodity trading advisors that can assist you in making the right decisions. You can also let them manage your funds and do the investing for you. You can ask them for a diverse portfolio composed of commodity assets, stock, securities, and other investments you deem profitable.

Research

If you l want to do your research, don't worry because there are commodity trading books you can read to help you with the basics. Research will also help you determine which markets to enter. The information you’ll get here will surely be useful in your commodity trading journey because it will help you make accurate forecasts and correct investment decisions.

Observation

Another way of learning is observation, you can create an account in a trading platform and work your way from there. Observe movements in the market and list down the trends. This will help you make your next forecast and move accurately.

Is commodity trading a stable industry?

Some people may still be hesitant about commodity trading. However, the growing market proves to be stable. Even big banks have digital assets in their portfolio. Because commodity assets remain safe during inflation and natural disasters, they are proven to be stable investments. Due to this growth, commodity trading jobs were opened to traders. With its current position in the market, commodity trading definitely sees better days ahead.

Is commodity trading secure?

Same with other digital assets trade, transactions have risks, but there are platforms where you can transact safely. The platforms act as governing bodies to ensure that the transactions are legitimate. Government bodies such as the Commodity Futures Trading Commission also foresee transactions. It creates laws and regulations for commodity trading to ensure that companies abide by the commission's policies to protect customer interests.

Is it advisable to invest in multiple commodities?

Though it is okay for you to invest in just a few commodities, it's more advisable that you avoid putting your eggs in one basket. Commodity trading platforms have recommended commodity assets you can invest in. It is suggested that you spread your investment because it is an excellent way to diversify your portfolio and minimize the risks. Nevertheless, these are only platform suggestions, and the decision on how you invest your money is still up to you.

Do commodity trading platforms offer free trials?

Yes, there are commodity trading platforms that give you free trials before fully committing to them. The purpose of these trials is to familiarize you with the process, terminologies, and norms of the trade. It will help you make your next move and forecast accurately, given that you'll be familiar with the fundamentals after the trial ends.

What are the most traded commodities?

Commodities have different classifications. There are metals, energy, and soft commodities. Though these are highly traded commodities, not all metals, energy, and soft commodities are tradable in the market. Some examples of most traded commodities worldwide are platinum, natural gas, lead, iron, nickel, coffee, sugar, corn, and wheat.

What is the difference between future contracts and forward contracts?

Both future and forward contracts are exchanged freely in the commodity market. However, future contracts are traded in the exchange markets versus forward contracts, which are freely bought and sold in over-the-counter markets. Also, the agreement in future contracts is more rigid because forward contracts do not have predetermined standards. This lack of standards does not provide guarantees that both parties will fulfill the contract later on.

How can one sell a commodity s/he doesn’t own?

The online commodity market allows you to freely buy and sell commodity assets even if you don’t possess it physically. In some cases, the delivery of the physical commodities can be done later on, depending on what is specified in the contract. It is also possible to repurchase a future or forward contract even before the maturity. Thus, it will dispense the delivery of goods.

What is a settlement price?

A settlement is the basis for the settlement of all outstanding trades. This is set in the Bylaws of the exchanges, which are usually computed based on the weighted average price of transactions in all spot and futures markets within a specified time frame.

Who are speculators and why do we need them?

Speculators are participants in the physical markets. They help in risk management and price discovery by observing trends. In the absence of future contracts in the market to determine the prices, it will be the speculators who will determine the prices by entering into hedge contracts. By accepting the risks of hedge contracts, speculators provide market liquidity. Considering their vital role, the futures market will not function well without speculators.

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