CMDTY's Trading Strategies

Commodities trading involves some of the world’s most widely used natural resources. From Copper to Corn and Silver to Soybeans, ETX Capital clients can trade on a wide variety of different commodities. However, when trading the commodities market, there are a few things to take into consideration;

  • 01

    Finding a Commodity that Suits You

    While there’s no problem trading more than one commodity at a time, don’t make the mistake of assuming that all commodities work in an identical manner. Different commodities can act with varying levels of volatility and liquidity. Take the time to research the commodities in which you have an interest, in order to find the specific commodities which are best suited to your trading style.

  • 02

    Up-to-date Information

    The importance of up-to-date information when dealing with the commodities market cannot be overstated. Commodities are different from stocks, for example, in that there’s no risk of takeovers and much less of a focus on any form of quarterly reports. However, certain commodities are much more susceptible to sudden fluctuations caused by a range of events which can be very hard to predict. Weather conditions, livestock diseases, major oil finds: these are just a few examples of the sort of things that can affect agriculture, livestock and energy commodity prices. While predicting such events is often impossible, keeping constant tabs on the news can help you to rapidly respond to information which could have an invigorating or enervating affect on a particular commodity.

  • 03

    Inter-related Assets: the Knock-On Effect

    This strategy works best when considering both commodities and other forms of products. It works on the understanding that the movement of certain assets can have an effect on other assets. For example, the decline of oil prices – a commodity – in the second half of 2014 led to energy sector stocks – equities – declining in value on a range of financial indices. This is one of the reasons that many traders include at least one commodity in their trading portfolio, as this allows them to better track the potential movements of companies related to the commodity in question. It should be emphasised that this strategy works best with the benefit of some trading experience; it can regrettably be all too easy to misinterpret how a stock will respond to a commodity’s movement.

    We hope that you have found the above information helpful. For more details about Commodities, why not check out our ‘What are Commodities’ or ‘How to Trade Commodities’ pages.

  • 04

    Safe Haven

    Many traders use certain commodities – precious metals in particular, especially gold – as ‘safe haven’ products, because they are perceived as having a measure of stability not readily available in some other markets. During periods of extreme volatility for the general markets investors often buy gold because it’s seen as a low-risk product, ideal for traders who want to wait out a volatility blitz and emerge only when the extremely rapid movement of the markets has slowed somewhat.

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