Basics Of Commodity Trading

While commodity trading is known for providing rather volatile price fluctuations, the high returns are well worth the effort and the investment in most cases. One of the best decisions that you can make when expanding your investment portfolio is to put thought into commodity trading.

Commodity trading is capable of providing asset allocation that is truly ideal, and is also capable of giving you a bit of an extra hedge against inflation because you are buying into something that has a great amount of global demand. Commodity trading, as we know it today, came about for the first time in Japan in the 17th century, where rice was traded in contracts. It was a period when farmers and buyers came together and decided to commit to each other future prices negotiated on suitable terms in exchange of grain for money. This phenomenon soon sees a rapid expansion and popularity hence giving birth to the concept of commodity futures trading, as we know it today.

One of the best decisions that you can make when expanding your investment portfolio is to put thought into commodity trading. Commodity trading is not one of the investment vehicles that people consider right away, so there is a decent amount of nervousness and apprehension associated with when to invest, where to invest and how to invest. In order for an investor to be successful in the commodities market, savvy investors need to have a thorough understanding of the demand cycles that the market goes through. These savvy investors must also have a decent view on the different types of factors that may have an effect.

One of the ideal avenues for you to pursue is to invest in specific, select commodities that can be analyzed individually, instead of simply speculating about products that you have no real background information on. While it can be enjoyable to speculate on products that are new and exciting to you, sometimes this can be a bad decision as you will be making guesses without any real information about them. You should be investigating and buying into commodities as a way to expand and diversify your portfolio. Commodities are an excellent way to turn your portfolio into something more exciting, and then money should be your second concern.

There are many types of commodities that are traded in the international market such as:

- Soft commodities such as Cocoa, Coffee, Tea, Sugar
- Agricultural products like Rice, Corn, Oils, Cotton, Wheat
- Metals such as Aluminum, Copper, Steel
- Precious metals like Gold, Platinum, Silver

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