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Commodities Trading: An Overview

Zeeshan Hussain

• 2 min read
Commodities Trading: An Overview

Commodities are an important aspect of most American's daily life. A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. Traditional examples of commodities include grains, gold, beef, oil, and natural gas.

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For investors, commodities can be an important way to diversify their portfolios beyond traditional securities. Because the prices of commodities tend to move in opposition to stocks, some investors also rely on commodities during periods of market volatility.

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In the past, commodities trading required significant amounts of time, money, and expertise, and was primarily limited to professional traders. Today, there are more options for participating in the commodity markets.

KEY TAKEAWAYS

  • Commodities that are traded are typically sorted into four categories broad categories: metal, energy, livestock and meat, and agricultural.
  • For investors, commodities can be an important way to diversify their portfolios beyond traditional securities.
  • In the most basic sense, commodities are known to be risky investment propositions because their market (supply and demand) is impacted by uncertainties that are difficult or impossible to predict, such as unusual weather patterns, epidemics, and disasters both natural and human-made.
  • There are a number of ways to invest in commodities, such as futures contracts, options, and exchange-traded funds (ETFs).
  • FOR TRADING COMMODITIES AND CRYPTOCURRENCIES JOIN https://www.okx.com/join/26144586,  https://www.mexc.com/en-US/register?inviteCode=mexc-1PfPi

Special Characteristics of the Commodities Market

In the broadest sense, the basic principles of supply and demand are what drive the commodities markets. Changes in supply impact the demand; low supply equals higher prices. So any major disruptions in the supply of a commodity, such as a widespread health issue that impacts cattle, can lead to a spike in the generally stable and predictable demand for livestock.

Global economic development and technological advances can also impact prices. For example, the emergence of China and India as significant manufacturing players (therefore demanding a higher volume of industrial metals) has contributed to the declining availability of metals, such as steel, for the rest of the world.

Types of Commodities

Commodities that are traded are typically sorted into four categories broad categories: metal, energy, livestock and meat, and agricultural, cryptocurrency.

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