Commodities Trading – How to Invest Profitably

Disclosure: We may receive a commission when you click on our links, but this is at no extra cost to you. Read our privacy policy for more information.

Want to Score Cash For Free?

The commodities market is one of the most important asset classes in the world, as it influences nearly all aspects of our day to day lives. It is ideal for beginners due to its flexibility and volatility, which can bring great returns over a long period of time. Read more below and find out how you can trade them in a profitable way!

What are Commodities

Commodities are interchangeable goods that are used in manufacturing processes around the world and they are an important part of our everyday life. They can be divided into four major categories:

  1. Precious metals (gold, silver, copper, palladium, and platinum).
  2. Energy resources (natural gas, crude oil, coal, and propane).
  3. Agricultural – soft commodities (coffee, corn, sugar, cotton, soybeans, rice, and cocoa).
  4. Livestock (pork bellies, live cattle, feeder cattle, and lean hogs).

Now that you know which they are, you’ve probably identified at least 3 commodities that you use on a daily basis. The price of your morning coffee or the gas you use to drive to work every day depend on the supply and demand, as well as on the way these assets perform on the commodities market.  

How to trade commodities in a profitable way

To gain access to this market, foremost, you need to register for an account with an online broker that offers commodity trading from gold and crude oil to pork bellies and coffee. These assets are an efficient way to expand and diversify your portfolio.

After you’ve opened an account, you must choose the preferred way to trade these securities. These are your options:

Commodities Futures

Want free money?

  • Aspiration: Want to get spotted a $100 for free? Simply sign up for Aspiration, and the free banking app will give you cash for free, you just relax while it gives you $100 just for opening a new debit card. There’s no catch, just use your card to make at least $1,000 in cumulative transactions within 60 days of opening an account. This bank account is legit and only takes two minutes to sign up for an account.

This is the most popular way to trade commodities and it is done through a futures contract. This contract represents the agreement to buy or sell a specific quantity from a commodity at a specified price and date.

Commodity Stocks

Investing in a commodity stock means buying shares from a corporation that manufactures and sells a certain commodity or operates in an industry related to it. Let’s say you’re thinking of investing in gold, but you don’t want to invest directly in the asset. In this case, you can buy shares from mining firms, refineries, or any other companies that deal with bullion. 

Exchange Traded Funds (ETFs)

Commodity ETFs work in a similar way as stocks do, the difference being that they buy physical commodities and then offer shares to traders that represent an amount of a particular asset. In this way, you can profit off the price moves without the actual risk of holding a futures contract.

Trading commodities, in any form, involves substantial risk of loss. To maximize your chances of getting profits, you can create a research-based trading plan to follow. Turn the objectives into a routine. For example, it’s extremely important to familiarize yourself with the factors that move the commodities markets and analyze them before every trade. Supply and demand, production interruptions, inflation or the weather are some of the major variables that impact commodities and you must keep an eye of them at all times.

Keeping a trading journal can also be very beneficial, as you’ll gather valuable information about the commodities you’re trading, while also learning from both your mistakes and successful trades.

Commodities Trading – Pros and Cons

Let’s start with the pros! As mentioned at the beginning of the article, this market is completely flexible, allowing you to trade 24/7. This advantage will come in handy, especially when you’re just getting started and trading isn’t your main source of income. In addition, given how volatile the market is, whether you go long or go short, the returns can be superb. TradeFW even makes it possible for you to trade with a leverage ratio of 1:10! Minimum-deposit accounts provided by the broker also control full-size contracts that you would probably not be able to afford otherwise.

Another advantage is that, unlike other securities, commodities perform well and can bring great profits when inflation is high. The assets are also more lucrative than other classes in the long run. All in all, it is the safest trading type, suitable for a beginner.

The fact that the market is so volatile can turn against you any time and cause a substantial loss of capital. The investment costs are also relatively high in comparison with other types of assets, but it mostly depends on the broker. It’s important to trade with an online firm that is transparent about the commissions it charges and the overall costs.

The Bottom Line

Commodities represent one of the most important asset classes in the world and are part of our daily life. You can trade them as futures, stocks, or ETFs – depending on your style and financial goals. The market is extremely volatile and in order to maximize your chances of gaining profits – you need to choose a reliable broker and come up with a solid trading plan. Stay focused on the reason you’re trading for and learn from every experience, this is the only way you’ll succeed in such a competitive market!

Want free money?

  • Robinhood is a free investing app for your phone. I really mean free all around – free to join and they don’t charge any fees to buy or sell the stock. You can get a share of stock like Apple, Ford, or Sprint for free when you join through this link. The value of the free share may be anywhere between $2.50 and $500 and fluctuates based on market movements. You’ve got nothing to lose.

Want Free Ideas to Make Extra Money?

 We've got you. Just let us know where to send' em:

Popular

Related

BeerMoney Staff
BeerMoney is a community that helps you discover the best ways to make beer money each month to pad your bank account.

Want to Make Extra Cash This Month For Free?

CompanyWhat You NeedEarning Potential
fundrise beermoneyfundrise beermoney$500 to Invest in Real Estate8.7 – 12.4% Annual Returns

LEARN MORE

swagbucks beermoneyswagbucks beermoneySmartphone$100+ Per Month

LEARN MORE

inboxdollars SmartphoneUp to $50 Per Survey

LEARN MORE

nielsennielsen panelSmartphone$50 This Year Just for Downloading Its Free App

LEARN MORE

RECOMMEND READS

Top BeerMoney Resources

Do NOT follow this link or you will be banned from the site!