What are commodities ?

A commodity is a group of assets or goods that are important in everyday life, such as food, energy or metals. A commodity is alternate and exchangeable by nature. It can be categorized as every kind of movable good that can be bought and sold, except for actionable claims and money.

What is commodity trading?

Commodity trading is basically buying and selling of tangible commodities on specific exchanges .

The best way to invest in commodities is through a futures contract. It is an agreement to buy or sell a specific quantity of a commodity at a set price at a later time. Futures are available in every commodity category.

Traders use these contracts as prevention towards the risks associated with the price swing of a futures’ indirect trade of goods or raw material. Trading in commodities involves a high amount of risk for amateur investors.

Advantages of futures:

  1. Futures are highly leveraged investments

  2. Future markets are very liquid

  3. Futures give huge profits if traded carefully

  4. Affordable minimum-deposit accounts and controlled full-size contracts

  5. Long or short futures can be set as target easily

 Precautions to be taken while trading commodities

  1. Futures markets are volatile

  2. Direct investment in the markets is of high-risk, especially for novice investors

  3. Gains and losses are magnified by leverage

  4. The unpredictable movement of trade even before you close your position