In the last few years, commodity trading has become an efficient alternative to traditional trading. Commodities are real physical assets with intrinsic value in the financial market. They are raw resources utilised in everyone’s daily lives. Commodity Trading Strategies are a form of tangible wealth, as opposed to stocks and bonds, which merely reflect one’s personal wealth.
People who trade online do not actually trade resources; instead they exchange commodity related contracts and gain access to the futures market. This is then utilised later without having to purchase the real commodity. In a recent turn of events, many authorised online trading platforms have come up with a smooth and simple share market app for commodity trading.
4 Successful Commodity Trading Strategies
Here are 4 successful trading strategies which can help you appreciate your portfolio value –
1.Adopt a Concentrated Approach – It is important to narrow down your interests to ensure a steady long term return from your chosen commodities. Focussing on a single item or a subset of a commodity is the key to successful commodity trading. If you focus on two extremely diverse commodities i.e., agricultural products and gold, at the same time, you may get distracted and might not make good profits.
If you still wish to trade in different products, choose a commodity that belongs to the same industry. For example maize and soy are both from the same industry and insights on one commodity can be applied to the other commodity trading.
2. Use the Golden Rule of Trading – The Golden rule of trading is to follow ongoing trends. If the trend is on your side, your chances of success are better. In order for the market to develop a new trend, the industry must break out of something. The method is a little difficult to grasp because not every trend will work in the long run. Product trends can be intrinsically powerful and durable if the dynamics of demand and supply are in play.
3. Find Your Special Market – You must master a specific market and carve out a speciality for yourself in order to stand out in the crowd of the trading market.Every industry has a distinct feature that you must be aware of in order to pick the most suitable and profitable commodity for yourself.
4. Keeping Track of Current Events – Resources that are traded for daily necessities can have an impact by an event that took place in some other country. Let’s take an example of a flood situation in India that can hit the production of rice as India is one of the largest producers of rice in the world.It can disrupt the demand and supply chain of the rice and prices might fluctuate. Or how the post-9/11 wars affect the stock prices and profits of a company considered to be the largest defense contractor. So it is advisable to keep a track of current events of the world to change your trading patterns on time.
Research is important before entering into commodity trading. You must know the product you are interested in, conduct market studies, and technical analysis. Try to discover patterns beforehand to avoid losses later. Try to learn about speculative trading. For online trading you must have a broker and a government authorised demat and trading account.