commodity-trading-heading-iconCommodity Trading

Commodity trading with AlphaBinary

A commodity can be referred as a natural resource that can be processed or sold. These natural resources are of high value. Commodity trading have, with time, become an essential component of binary options.

Commodity trading is usually done in large quantities, either on the cash market or more frequently on futures exchange. Demand for commodities is highly influenced by economic factors and fundamentals, therefore, commodity prices have great potential to fluctuate. In binary options trading, traders do not have to physically buy the commodities, they only need to speculate over the price of specific commodities during a given time, on different trading tools. This has for advantage of giving traders broader access to the financial markets, something which would have been very limited outside the context of binary options trading.

How is commodities trading classified?

Not many traders know that commodities are actually classified in three categories:

Soft Commodities

Soft commodities are typically grown commodities and because they belong to soft category, they can be highly volatile in the short term. Most of the soft commodities are susceptible to weather changes, which are different and pertain to different weather conditions around the world. Some examples of soft commodities are: Corn; Wheat; Rice; Sugar. These commodities are affected by climate, season and man-made resources. Since these commodities might easily spoil, they are extremely exposed to price volatility.

Hard Commodities

These types of commodities are normally extracted from mines or from other natural resources. Investors are more interested with these particular commodities because they have high life value, and they integrate easily in industrial process. Common examples of hard commodities are: Crude Oil; Gold. Crude oil is traded in trillions of dollars’ worth of oil futures every year and so is Gold. They are the preferred commodities of investors.

Emerging Commodities

Emerging commodities are going to strike the market soon, but not actually available on futures trading for the moment. Investors think that these commodities will soon be of great value on the market, and will be highly profitable on trading platforms. These commodities hold high value and some examples are: Water; Ethanol.

Commodities trading with AlphaBinary

In the quest towards providing traders with the most thrilling financial opportunities, AlphaBinary has endowed its trading platform with the broadest range of commodities under different trading tools. Trading commodities gets even easier with the high-end trading instruments put at the disposition of traders.

Here’s how to trade Commodities on the AlphaBinary platform:

  • Choose from the different trading tools available on the trading platform, such as the Classic Binary Options, Long Term Trading or One Touch Options
  • Spot the ‘Hot Assets’ Tab and select on the ‘Commodities’ section
  • Pick your preferred commodity (Gold, Silver Oil) on the Asset segment
  • Accordingly decide upon your expiry time and the amount to be invested
  • Your profit percentage will automatically be calculated once an amount is inserted, giving you an indication of your potential gain in case the trading market agrees with you

Common factors affecting commodities trading

Many factors help to ensure stability in prices. As where commodities are concerned, stability in prices are normally achieved through futures contracts.

Futures Contract

Futures contract refer to buy now send collect later principle. Futures contracts are normally traded through a futures exchange. The contract represents an agreement between two parties to exchange a given quantity of commodity, which will take place at a specific date in the future. The price is also already defined for a future transaction.

The relation between inflation and commodity prices

Commodities may even raise the alarm towards rising inflation in a particular country. Commodities can be used as a shield against inflation. So if inflation seems likely to rise without precedent, commodity prices rise very quickly. This situation pressurizes traders to immediately take out their money from investment.

Weather Conditions

The weather highly affects the outcome of commodities. Much of the harvest is controlled by the weather. Commodities such as Sugar, Wheat and Coffee are highly dependent on favorable weather conditions.

Political and Economic Factors

A lot of fundamentals play an important role in the fluctuation of crude oil prices. Political and economical news which take place every day, impacts on the current status of crude oil. For example, often in the Middle East, there are feuds which cause the price of oil to fluctuate due to uncertainties pertaining to supply.

The Demand and Supply quagmire

The simple move of Demand and Supply can cause high fluctuations in prices. For example, if an oil producer will increase supply but there will be less demand, or the demand level remains unchanged, the price of Crude oil will go down. On the contrary, if demand is high, and keeps on increasing, while the supply level remains low, the Crude oil prices will soar higher.

Conclusion:

Commodity trading, demands a lot of research, patience and knowledge. It is important to know when to trade and how to trade. AlphaBinary has a pool of expert traders that can help you make the most of this underlying asset, in case you are hesitant to start trading on your own.

Open an account with us to trade commodities online and get most of the financial market with AlphaBinary!