1) Short selling commodities
As commodities are traded online via CFDs, traders have the right to sell them instead of just purchasing them. It means that the value does not require to surge for traders to make gains. Moreover, unlike the stock market in the commodity market, there is no uptick rule.
2) High returns on investment and high liquidity
There are some goods, such as oil, gold which are relatively more volatile in comparison to others as numerous factors guide their prices. These factors include the economy’s political conditions, financial status, climate, demand and supply of the commodity, and price variation due to new export and import rules or policies. Just because of these reasons, commodities can take short-term trading positions and can be very attractive.
3) Suitable for diversifying your trading portfolio
Diversification of a trading portfolio is essential in trade. It is very well said that never keep all eggs in the same bucket. Diversifications mitigate the risk involved with trades. Commodities are an excellent way to diversify a portfolio. For instance, if you have spent on indices and stocks, analysts will always recommend adding any commodity (as per your wish) to your trading portfolio and trading them concurrently. It will help you when the stock market crashes suddenly or indices fall in value.
4) Safe investment tool
Whenever financial market price goes down, analysts advise people to invest in commodities as they are considered a safe investment tool at the time of sudden shock. The demand for essential items such as gold, oil, and corn always remains high. Trading commodity futures have shown tremendous results at the time of economic slowdown and market crash.
How to trade commodities online?
1) Opt for an online trading account: You require to open an online trading account to start trading. If you are a neophyte, you can opt for a demo trading account to practice trade with virtual cash for a limited time.
2) Choose a financial market and asset for trading: Firstly, choose the commodity market option and then select the asset you wish to trade CFDs or spread bet on.
3) Choose to sell or buy commodities: If you think that prices are supposed to surge in the future, go long on your trade. On the other hand, if you think that price is supposed to decline, you may choose to go short on position.
4) Enter a trade size: Choose how many CFDs or units you wish to trade or decide the spread betting or the amount per point movement. Keep in mind that in CFD trading, a single trade value can change based on the financial tool you have selected to trade.
5) Apply risk management: Financial risks are inevitable. They can land you in several problems, or you can even lose entire capital if not taken care of. Thus, including risk management strategies in your plan is essential.
6) Monitor your trade: Once you have placed a trade, it requires continuous monitoring if you are day trading commodities. You must do this delicately as losses can even exceed your available balance or deposit.
7) Close the trading position: If you have set the stop-loss order, the trade will automatically close when the price reaches the set level. However, if you are trading without a stop-loss order, you need to do this when the price falls manually.
