Getting initiated to the interesting realm of commodity trading

Wars, economic and political upheavals and controversies have sparked in the realm of commodities but for the investors, commodity trading remains a

preferred way of trading. Commodities market, comprising it's historical and modern era, has always had a remarkable economic impact on countries and the

citizens.

The impact of commodity trading and markets in the course of history is not totally clear, but studies and research have proved that rice futures were

probably traded in China 6,000 years ago. Scarcities on critical commodities always fuelled wars in this world, while oversupply of any commodity can pose a

disturbing impact on a country by devaluation of the prices of the core commodities.

In the present scenario, energy commodities like crude oil are closely monitored by countries, multinational corporations and customers alike.

• The average Westerner can become drastically impacted by high prices of crude oil.

• On the other hand, oil-producing nations who are severely relying upon petrodollars as a source of earning, can be adversely affected by diminishing of crude oil prices.

• Abnormal disruptions created by weather or natural calamities can be an impetus for price fluctuations, but might also cause food shortages in specific regions.

• Various commodities play a significant role in the global economy as a whole and investors interested in commodity trading can bank on the economic happenings into opportunities.

• Precious metals comprising silver, gold, platinum, lead and copper; • Agricultural produce incorporating corn, spices, wheat, soybeans, coffee,

rice, cocoa, sugar and cotton

Options for traders in commodity trading comprise four categories of commodities which include

• Livestock and meat like live cattle and feeder cattle; • And the most preferred category of energy comprising heating oil, crude oil,

gasoline and natural gas being some examples.

• Commodity trading in the exchanges can need pre-decided standards so that the trades can be properly and sensibly executed.

• You can't buy 500 units of cattle only to discover that the cattle are sickly, or find out that the sugar you have bought is of substandard quality.

• There are several ways in which commodity trading can be really diverse from investing in traditional assets such as stocks and forex.

• Economic growth and technological advancements on a global scale and market demands for various commodities can influence the staples prices like oil or corn.

• Basic principles of economics usually affect the commodity trading, lower supply is equivalent to higher prices and vice versa.

• Commodity trading can rapidly become risky investment plans as they can be affected by unforeseen events. These comprise strange weather patterns, natural catastrophes, outbreaks.

• For instance, grains follow a very active trading and but are fluctuating enough during periods of inconsistent weather.

• So, it is not a good idea to allot more than 10% of the portfolio to the various commodities.

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