Commodities

Commodities are assets that are either naturally grown or occurring in the environment. Most commonly this includes precious metals such as gold, silver, and palladium.

Beyond metals, commodities can also focus on agricultural or industrial goods that are central to manufacturing or other sectors. This includes crude oil, copper, wheat, and others.

Relative to other assets, commodities are an extremely complex form of investment, with many similarities and differences to existing products.

Commodities can be traded on exchanges where investors work as a team to purchase or trade products in an attempt to generate profit from the fluctuation of market prices or because they need that particular product.

Additionally, commodities are often traded through the use of exchange-traded-funds (ETFs) to give exposure to investors.

How to Trade Commodities

Commodities trading is not reserved only for institutional traders but also ordinary retail ones as well

Nearly all retail brokers carry some offering of commodities, giving investors access to these assets.

Investors, just like companies or other investment institutions, are able to make a profit from daily changes in commodity prices.

There are several methods that investors can use to trade commodities. Commodities can be traded in futures – these are contracts that direct the purchase or trade of a commodity at a certain price.

Futures trading can be particularly risky and is usually reserved for more advanced traders given the complexity of these trades.

In addition, commodities can also be traded with options – this means the commodity is purchased or traded at a particular date and price.

Commodities are also commonly traded with leverage, not unlike other assets, which can result in large profits or losses due to volatility in markets.