The benefits of commodity trading with Amelok
- Trade without actual ownership of a financial instrument that is represented by a contract
- Trading on rising/falling market prices
- Earnings on falling prices with the help of "short" position
Along with global currency markets, commodity markets offer various opportunities for private traders around the world. “Soft” commodities - sugar, wheat or corn have been trading for several centuries now, and they owe their popularity to investors to their quality as a tool for diversification and risk management.
Investing in products that are traded in contracts is a reliable way to reduce risks even in the face of inflation or economic uncertainty. They protect both the buyer and the seller of contracts from strong price movements.
The operation of the commodity market is functionally ensured by high seasonal volatility, sharp increases in volumes under contracts and unpredictable trends. This allows experienced investors to earn impressive dividends from their investments due to frequent price changes and high volatility, as well as a high level of liquidity of all contracts and goods.
What are commodity assets?
Commodity assets are divided into two categories: hard and soft. “Solid” commodity assets include gold, silver, crude oil and iron ore. Soft commodities range from coffee and corn to soybeans, cocoa and wheat. Solid commodity assets owe their name to the fact that, unlike soft assets, they have a long shelf life. Commodities are an integral part of the modern economy because they produce, or contribute to the production, of everything: from computer and tablet to food, machinery and office equipment.
How do commodity markets work?
Commodity markets vary according to complexity, trading sessions and tools. The most famous include the London Metal Exchange (London Metal Exchange), the New York Mercantile Exchange (New York Mercantile Exchange) and the Chicago Board of Trade (Chicago Board of Trade). In these markets, two types of traders usually trade: speculators and hedgers. Speculators are hedge funds, asset management firms and retail investors who place orders for assets in order to capitalize on price movements. The sale of an asset makes a profit if the price of the asset falls. On the other hand, the purchase of an asset makes a profit if the price of the asset rises. In other words, they monitor the rise or fall in the price of commodity assets, because profit affects their trading decisions. Conversely, hedging occurs when the trader places a position in the opposite direction relative to the position he has already placed. For example, a hedger who has placed a long position on gold will at the same time place a short position in order to protect himself from losses. For example, airlines form a fuel hedging strategy by trading in oil and gas in order to limit the impact on the increase and change in fuel prices.
What is the difference between trade in commodity assets and foreign currency?
There are several differences between commodity asset trading and foreign exchange. Trading time - currencies can be traded non-stop from Monday to Friday, while commodity markets usually stop working at 5:00 pm New York time. (The start time depends on the location and product). Liquidity - currency trading is a highly liquid activity, as opposed to commodity asset trading. The exceptions are gold and crude oil; most commodity markets lack liquidity. World events - global geopolitical events tend to affect commodity prices, while prices for currency pairs vary depending on the economy or the social status of a country or region. The only exception may be the case when the economy of the country is focused on commodities. Such countries include Saudi Arabia, Australia, Nigeria or South Africa. Forecasting: There is no 100% predictability in business and investment, but it is much easier to predict the movement of currency pairs than commodity prices that soar and fall due to, for example, political instability in the country, adverse weather conditions that lead to flooding. or drought, or strikes of miners or agricultural workers. Leverage: For foreign exchange transactions, margin requirements are lower and less stringent. Real delivery: Foreign currency traders do not need to supply, which means the agreed amount they operate on. For example, if you buy 1 lot of EUR / USD, you will not have to transfer $ 10,000 when opening or closing a transaction. The scenario may be different when trading commodities, especially those that require physical delivery, say, fuel or bags of coffee beans, to a specific place.
Commodities are an integral part of any successful investment strategy. They help investors diversify and hedge their portfolios, giving them the opportunity to earn an acceptable income in the long run. In order to effectively trade commodity assets, prepare in advance and study the various types of goods, paying particular attention to the ones you want to trade. Then try to understand how commodity markets work, how investing in the FOREX currency exchange market differs from commodity trading, and whether you are ready to operate with high-risk instruments, such as commodities.