The commodity market is almost as commonly used as the stock market. Usually, one can notice a substantial flux in commodities and their prices due to micro and macro-economic factors.
For example- Agro-commodities and their prices are conditional to climatic conditions. Whereas metals waver based on their demand and supply ratio. The current annual turnover of the commodity market is around $21.71 Billion.
Commodity Market is a blend of spot and futures trading with future options, forward and spot prices. Subsequently, the prices of the various commodities are set. Simply put, the price is calculated according to the speculators’ mindset along with the demand/supply.
Physical commodities are purchased in cash or spot and sold at a negotiable price.
Commodities are categorized into hard and soft commodities, and some of the significant hard commodities are oil and gold, while the soft ones are wheat, coffee, cocoa, and sugar.
The commodities market and its exchanges occur according to international associations’ regulations, which proves to be advantageous for both buyers and sellers. Additionally, the commodity market is simpler to understand for beginners.
With XFlow Markets, you can trade in diverse commodities like metals/energy products/agricultural commodities.
Here is some essential information about these commodities:-
Metals: Metals are an excellent investment in the commodities market as they provide good returns. The two types amongst metals are precious metals and industrial metals.
Agricultural Products: Agro commodities are one of the most pivotal pillars of humankind and its existence. Since the agriculture sector encompasses more than 36% of the world’s workers, most of the world is reliant. XFlow Markets clients can trade in the bulk of commodities like cocoa, soybean, cotton, sugar, corn, and wheat.
Trading in commodities has minimal transaction values, trading time, and minor margins, compared to forex markets. The profit depends entirely upon your trading skill, systematic market evaluation, and appropriately placing a trade. Some commodities show little movement, while others are highly volatile. You can choose how and when to execute a trade according to its bullish/bearish trends.
Many precious metals like platinum, silver, and gold, generally safeguard your position from inflation and an uncertain economy. While you invest in other volatile instruments, the part of your funds you have invested in these commodities can act as your safety net.
You can diversify their portfolio by investing in commodities as this market functions differently compared to the stock or currency market. In uncertain conditions like the stock market crashing, you will sustain a part of your investment.
The commodity market is remarkably transparent, especially with the future market due to the viable, fair price and active participation of the traders and investors. If you research thoroughly and invest wisely, your trades made in this market can fetch astonishing returns.
Risk-taking enables profit-making. This motto can help traders to capitalize on this price volatility. But the large-cap companies either shoot up or collapse down with heavy losses.
Hedging proves to be an excellent strategy for protection over inflation and other extreme movements in the market. The price of commodities can rise due to inflation when investors sell their bonds and stocks, and hedging can help minimize the loss.
The international market gives you an opportunity to trade in commodities which may not be available in your country or area. Now traders are not restricted to commodities in and around their location. They can invest in all commodities which are mined from any other part of the world.
The commodities market can also be quite volatile, according to global events. Therefore, the exchange is the middle ground for safeguarding counterparty risks to investors.
While many brokers worldwide offer a platform for commodities trading, here are some of the perks you will have when you trade with XFlow Markets.
Commodities consent a portfolio to mend total return at the same level of risk. One of the leading based U.S. based authority Ibbotson Associates, on asset allocation projected that commodities increased returns between 133 and 188 basis points, at no extra risk.
Commodity Futures Trading Commission (CFTC) is the prime regulator of commodities and future markets. The CFTC is an independent agency of the US government which was created in 1974. Apart from this, the Commodities Exchange Act prohibits falsified conduct in the trading of future contracts.
A short position consists of selling future contracts or selling of cash commodities without balancing future transactions. (A cash commodity is a genuine, physical commodity someone is buying or selling, like corn or soybeans, also referred to as actual.) A long position includes buying future contracts or possessing the cash commodities.
Hedging is when you use an instrument for price defense comprising the balancing of price-change danger in any cash market position by taking an equal, but differing position in the same market. Whereas Speculating is buying and selling an instrument, especially future & options contracts to make a profit. A speculator will buy and sell by according to his guessed future price movements, but has no intension to essentially possess the physical commodity. Therefore, speculators assume market price risk and add liquidity and capital to the future markets.