Understand what commodities are, the types available (such as energy, metals, agricultural products), and how commodity markets work.
Commodities trading involves buying and selling raw materials like oil, gold, and agricultural products, providing opportunities for investors to profit from price fluctuations in these essential goods.
You don’t think about where an ear of corn or a bag of wheat flour was farmed or
milled when you buy them. As a result, they’re both regarded commodities.
They are interchangeable raw materials that can be bought and sold in large
quantities. They are frequently used as components in the production of finished
goods.
Commodities are divided into two categories by investors: hard and soft. Finding
hard commodities necessitates mining or drilling. Soft commodities are
cultivated or grazed. Agricultural products, livestock and meat, energy
products, and metals are the four basic forms of commodities.
Commodity trading is essentially the purchasing and selling of these raw
materials. It usually occurs through futures contracts, in which you commit to
purchase or sell a commodity at a specific price and on a specific date.
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Watch our commodities trading videos to get the most from the markets & become a profitable commodities trader.
Play VideoUnderstand what commodities are, the types available (such as energy, metals, agricultural products), and how commodity markets work.
Trading futures typically requires a substantial amount of capital. Initial margin requirements can range from a few hundred to several thousand dollars per contract, depending on the commodity and market volatility. You may need at least $5,000 to $10,000 to start trading futures comfortably.
In trading, "margin" refers to the amount of money a trader needs to deposit with their broker to open and maintain a leveraged position. Essentially, it's a good faith deposit to cover potential losses. Margin trading allows traders to control larger positions than their actual capital would otherwise permit, which can amplify both gains and losses.
If the market moves against your position, you might be required to deposit additional funds to maintain your position. Failing to do so could result in your position being liquidated at a loss, potentially exceeding your initial investment.