Online Commodity Trading

Commodities are natural resources or universal products for which there is constant demand, such as oil, gold, soybeans, silver, or copper. These commodities can be bought, sold, and traded within an open international exchange similar to a stock. One of the most convenient ways to trade commodities and earn a profit is to utilize online commodity trading platforms/brokers that will mediate and help simplify the process of trading commodities from the comfort of your own home. Fortunately, there are literally thousands of such platforms/brokers available online, which are seen in the form of user-friendly, interactive websites.

Trading commodities has a mystical appeal to many people. The idea of being able to trade commodities and futures online has been like finding the crock of gold at the end of the rainbow. To others it has been like meeting the grim reaper in person. You will get a great sense of independence with online trading commodities and you can expect your trades to be performed quickly and efficiently by working with your online commodities broker.

However, this is not all a bed of roses, novice traders face a number of risks and challenges, and not taking the correct professional advice from experienced successful trades can lead the novice to make dangerous mistakes. Take time to understand how day trading commodities works before you get started. It will be time well spent. Don’t open your account until your homework is complete and you feel that you understand the challenges and are ready to make money.

Traditionally, commodity traders would contact their broker via telephone with a specified order, and then wait for a return call from their broker that would notify them that the order has been successfully fulfilled. However, with the advent of the Internet is now possible to trade commodities instantly in a global market, without having to account for delays that are usually associated with conventional commodity trading. If you are interested in profiting from commodity trading online, then you may want to consider the following paragraphs which briefly overview how to trade commodities online.

Finding and Choosing a Broker
Finding a commodities broker is as simple as conducting a thorough web search using keywords such as “commodities broker”, “online commodity broker”, or “professionals commodities broker”. One of the most important aspects to consider when choosing a commodities broker is the speed at which they are able to execute trades, as time is a critical component of online commodities trading. Thus, you’ll want to select a reputable commodities broker that is known for executing trades swiftly and providing top-notch customer service. Ideally, you’ll want to choose a platform/broker that will provide integrated access to a backend interface that includes charts, statistics, strategy analysis, and instant market quotes. It is also important to choose a broker that charges affordable brokerage and/or membership fees, as this will have a significant impact on the overall profit generated through each trade.

Purchasing Commodities
After selecting a broker, it’s time to begin purchasing and trading commodities for profit. There are three main investment instruments through which commodities can be purchased – exchange traded funds (ETF), options contracts, and futures contracts. When choosing which commodities to invest in it is best to examine seasonal tendencies and patterns within the market, as recent history tends to repeat itself somewhat when it comes to the value of commodities. For example, the price of oil usually rises slightly during the months of May and April because people tend to drive more during the summer. Also, the value of gold tends to start rising in September as the holiday seasons begin to approach. Such seasonal tendencies and patterns can be monitored and utilized for the greatest profits, especially when trading agricultural commodities that are grown and harvested on a seasonal basis.

Monitoring Successful Commodity Traders and Developing a Sound Trading System
Once you’ve learned the basics of how to trade commodities online, you should begin continuously monitoring trades made by larger corporations, hedge funds, and mutual funds. By examining the actions of such successful institutions it is possible to emulate their trading strategy to a certain extent, and incorporate it into your own investment portfolio. Ultimately, you’ll find that many established institutions that have been successful in commodities trading are utilizing a proven trading system that is statistically shown to be effective. Fortunately, there are many such commodity trading guides and systems available on the Internet that will teach you how to trade commodities online while minimizing risk and maximizing profits.

What Are the Benefits of Online Commodity Trading?
Before the diffusion of the internet it would have been impossible to imagine how the whole trading of commodities has been revolutionized. Trading commodities online allows you to get set up and get trading by going to a single supplier. You could consider this a one-stop shop solution. From the moment you log on to your trading account you will have everything around you. As it is sometimes called, your commodity trading dashboard, will open up in front of you. You will be able to get an array of information and services from your online broker.

Real time quotes, market charts, futures news, technical and research analysis programs are all on hand to provide you with a wealth of information. For the first time, the commodities market is open to online traders who are able to make their own independent trading decisions and execute their trading strategies. In previous years this was no more than a pipe dream.

Trading online is vitally important, unless you plan to use a trader to manage your account. Even if this is your choice, the risk is that advising traders or buying and selling yourself by phone is a high risk. Should any disaster occur from a tsunami or a terrorist attack take place, you will want to be able to take action fast.

Commission Charges
The internet has opened the market and driven down the commissions that commodities brokers charge, thanks to fierce competition and transparency on the internet. Budget to trade futures contracts for less than $10 per round turn with the majority of online brokers. This reduction in the commission rates has opened up the options for a number of new strategies that include day trading, short-term trading and spreads. So if, for example, you intend to launch a sophisticated strategy that combines a mix of futures and options, in the past the commodity brokers could have charged you a market rate of $150. Now with online future brokers you could end up paying no more than $30. This cost reduction has meant that number of trades that were previously uneconomic are now available.

What Are the Dangers of Online Commodity Trading?
Ignorance is the greatest danger for online commodity day traders. Online commodity day trading is no different from any other business venture. Not being prepared to get the services of a mentor, someone to advise you and watch over your shoulder, as you make your first trades, is at best inadvisable and at worst, downright financially suicidal. Evidence shows that many novice traders have made stupid mistakes caused by ignorance, amused their more experienced competitors and lost themselves a considerable amount of money.

Take On a Mentor!
In the same way you would not expect to lean to fly without the services of a flight instructor, the same applies to commodity trading. At least until you feel comfortable dealing with your commodity day trade, make sure you have the services of an experienced mentor who can help you avoid the mistakes novices make. In addition, your mentor can advise you what are good buying and selling decisions and which ones are to be avoided.

Just being able to ask any question and get a fast informed answer will save you time and a great deal of money. Whatever you pay for these services, this will be money well spent. The use of an experienced commodity broker mentor will not only teach you the ropes, but can also save you from unnecessary risks and losses.

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