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Home» Gold & Oil » Commodities » Introduction to Commodity Trading

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  • August 2012 (10)
  • July 2012 (16)

Introduction to Commodity Trading

Written by: Sophie May

The commodities market consists of many different assets, all physical goods. These assets include natural resources such as oil, metals such as gold and silver, and agricultural products such as corn and wheat. In traditional investing, it is also possible to trade futures at an exchange such as the notable Chicago Board of Trade. Futures are standardized contracts among buyers and sellers which specify the amount of a commodity, its quality and delivery location.

The relationship between several commodities to other assets, for example between the USD and oil, makes commodity trading an important part of any expert’s portfolio. Among those who have previously traded forex and currencies, adding commodities is often seen as the next natural step.
The general direction of price movements for commodities like gold and oil is largely affected by geopolitical events and economic reports, from the threat of war in the Middle East to employment figures. This makes the trading of commodities accessible and easy to follow in today’s world of 24/7 news, particularly for the binary trader who is solely concerned with direction and not exact price movements.
In recent times, the flight to precious metals has seen an increase in the unit price of assets like gold and silver. Trading these precious metals has therefore been difficult for the small-account investors, who have had no choice but to leverage their accounts heavily if they wish to continue trading, despite the high risks associated with doing this. However, the binary options industry has provided an answer to this problem, since contract prices are fully determined by the trader and are unrelated to the actual value of the underlying asset.

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