Are you interested in having a new way to invest your money? Do you already have a retirement account and want something more exciting than just stocks and bonds? If so, then commodities are precisely what you’re looking for.
Commodities are a broad category of tradable goods, including metals, food products, and financial instruments such as currencies. There are several different ways to trade commodities online, but all require some up-front capital investment or purchasing of contracts.
Generally speaking, the larger the risk, the larger the reward for investing in commodities such as gold and silver. Furthermore, while there is no guarantee that commodities will rise in price over time, historically, they have done very well over long periods.
Online trading of commodities
Trading commodities online requires the least amount of initial investment through means such as futures contracts, where you pay a fraction of the price of actual goods and receive its value later. For example, if you buy 100 barrels of oil at $40 each for delivery in three months, paying only $4,000 (a small fraction of the current market price), you receive what is known as an extended position. That is, your contract entitles you to 100 barrels of oil which by this time will be worth far more than $4,000.
If, on the other hand, oil goes down to $30 per barrel for some reason, then your contract would be worth far less than originally paid. Therefore, it’s essential to do your research, determine what you think the commodity will be worth in the future and select a contract that works for you.
Trading commodities online requires some knowledge of economics and finance, but it’s not nearly as difficult as many people might think. Remember that while there are costs involved with trading commodities online, like any other investment, there is no one guaranteed way to make money when investing in them.
That said, over time, if done correctly, the risk/reward ratio can swing heavily in your favour, provided you know what you’re doing for more information about how to start trading commodities online.
How to trade commodities online in Singapore
There are now several retail FX brokers that offer trading commodities. The first step is to determine the type of commodity you would like to buy and then figure out which broker offers the best price for that commodity:
Looking at world prices online can be difficult as they vary significantly depending on where you are located. Remember, buying low and selling high is all that matters. For example, locally produced corn in rural China might cost USD 0.20 per kilogram, whereas similar products bought at a food court or restaurant may cost USD 4 per kilo because of transportation costs and other market factors outside the control of the individual investor.
Recommendations for trading commodities
The commodities market is a vast and diverse area, and it’s important to know what you’re getting into before you head down this road. Here are some recommendations for trading commodities.
If real money is involved, you don’t want to put yourself in a position where you lose it all, so always start small and grow from there.
Develop a cash reserve
Having cash available is essential, mainly when prices fall or get volatile. You should be able to stay in the market without being forced out after a bad trade.
Keep records of the transaction history.
Good record keeping will help avoid future disputes or confusion about what happened. It’s also recommended that you take screenshots of your online trading account while logged in to prevent cyber theft of personal information.
Commodities trading requires a lot of research and knowledge to make good trades. There is no room for guesswork in the commodities markets. Furthermore, commodity prices can be highly volatile. If you are new to online trading, contact an online broker at Saxo Bank to help you get started. For more information, visit https://www.home.saxo/en-sg/products/commodities.