Easy way of Best Trading Method for Commodities

Commodities are a form of assets such as oil, food, etc. We can exchange these assets for financial gains. However, you cannot just trade any commodity. First, you should have the knowledge of the value of certain commodities. Some commodities sell better than others.

There are many trading methods and secrets that traders use in the market to maximize profits. Knowing the best trading method for commodities is extremely essential for a trader. However, commodity trading is different from stock trading. We will discuss these strategies for maximum profits in this article. But first we will see advantages of commodity trading.

Advantages of commodity trading

There are many advantages to commodity trading. We will now list down these advantages below.

• Commodity trading will not affect you much in times of inflation such as present times. Because when the demand of a commodity will increase, the price will also increase. The price increases because the cost of raw materials and labour also increases. This will allow you to make more profits in return.

• Commodities consist of raw materials. These raw materials create products. Wars and chaos disrupt the supply chain. Hence increasing the demand of commodities. Consequentially, the cost increases.

• Commodities are an appealing investment for portfolio diversification. This is due to their negative or little correlation with stocks.

What affects the prices of commodities

The most crucial factor that affects the prices of commodities are supply and demand. There are many factors that effect the supply and demand chain of the commodity.

Economy

People consume more with a healthy and growing economy. Hence, the demand for commodities increases thus increasing their prices and vice versa. These commodities may include food products like rice and flour or metals such as iron or lead.

Weather

Weather can play a huge role in the food sector. A harsh weather can affect the growth of crops thus increasing demand and price.

US Dollar

The rise of the US Dollar will increase the prices for people in countries that do not use US Dollars.

Natural Disasters

Natural disasters can have an influence on commodity prices if they interrupt the supply chain

Golden Trading Strategies

Now, we will give you the best trading method for commodities. You now know the reasons behind the fall and rise of commodity prices. This will help you understand the strategies we are going to share with you.

Keep yourself UpToDate

Keep a look out for the news. Be well-informed. Study the financial and political situations of the world, especially your country. This always give you information about the market environment. Start by reading a financial newspaper to increase your knowledge of trading.

Technical analysis

Technical analysis is the base of every trading strategy. Its all about numbers. The technical analysis will help you in making your decisions such as when to start trading a commodity and when to stop. Which commodities are high in demand, and which are not. You can use technical analysis with other strategies. This will help in trading and creating a complete marketing plan.

Range Trading

We trade on price channels in Golden Trading Strategies. Traders buy commodities at the trendline of support level and sell these commodities at the trendline of resistance level. Support trendline is when the price channel is at the bottom. Resistance trendline is when the price channel is at the top. Supply and demand chain affects the bottom and top values in the market. However, the price of the commodity may sometimes even cross the resistance level.

Breakout

The trader will buy right before the price of commodity will start to increase in the market. He will sell just before the price lowers in the market thus making a profit. We can use breakout strategy in conjunction with the Golden Trading Strategies.

Fundamental Trading

This strategy involves market research, politics, and economy. For example, if US has a high demand in oil, the companies will increase oil prices to capitalize at the opportunity. Only a trader who has researched on the economical condition of US, will be able to avail this opportunity.

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