How to choose commodities for trading ?
The question of choice seems to be an eternal question for every trader. Sooner or later even the most favorable trading assets can become boring. That is especially the case when risk hunger awakens in the trader. And then there it is again. The eternal question. How to choose commodities to trade?
Commodities are the raw materials humanity uses to produce products which are necessary for our well-being and overall living comfort.
According to the market research there are about 30 popular commodities. And the situation where an individual knows nothing about at least one commodity seems impossible. We hear about it from the news and look at it in the movies. Oil and Gas would be the most talked about assets. And with world financial balance tied tightly with this asset we all hear at least once a week about the movement of oil price. It is wise to start trading with the commodity that one knows at least something about. No use to start trading copper and/or corn when you know absolutely nothing about the particular asset.
Those who come across different or at least one commodity at their workplace are of course recommended to start or switch to them. This may ensure a little success in the beginning as the tendency of the markets movements and their influence on the price of a certain commodity will be more familiar to the trader. The connection between current profession and trading commodities is easily traced. Those who make and sell jewelry will probably know more about gold and silver prices. Taxi drivers will surely follow gas and oil prices. Lumber price will most likely be known to builders. So there you go – the first step to choosing.
Of course price and stability of the asset will be the core one in the choosing process. That requires more effort. To understand which commodity has more trust of the investors one has to check and monitor futures prices on the chosen asset. The better the index – the more trust is put into a certain place. The more chance is to win. Of course current market movement also has to be accounted for.
Those who have been trading for some time now tend to focus their attention on one or two major points. That is quite logical as trader’s attention stays in the right place like that and doesn’t spread to the various commodities, robbing said trader from possible earnings.
It is very important to understand that commodities are a part of the market and that they tend to change and be under pressure and turbulence as well. There is no guarantee that even the most preferred commodity will be in the green zone all the time, even more that it will certainly not happen. Even the most popular and pricy go down. So it is very important to be careful and enjoy the process of trading remembering that it is impossible to always win.
- by Anna K.