Home » A Step-by-Step Guide to Commodity Trading

A Step-by-Step Guide to Commodity Trading

by Uneeb Khan
A Step-by-Step Guide to Commodity Trading

Trading and Investments are the golden-apple opportunities that not everyone uses. In a competitive world, success defines everything, and unless you’re making money while asleep, success is hard.

Trading in commodities and indices is the best way to get started on investments and passive income. However, one needs to put in some effort to learn to trade Commodities online. Worry not because this guide takes you through each step slowly and in detail, ensuring you understand every facet of commodity trading and exchange.

What is Commodity Trading?

Before learning how to trade in commodities, one should understand their nature and how it works. Commodity Trading involves the trading of commodities and their derivative products. Commodities are Raw Physical Assets that are available for purchase and sale. Many firms broadly categorise these products under different industries, ranging from crops to crude oil or iron and steel ores.

How does Commodity Trading work?

Commodity trading is safe as their demand remains guaranteed regardless of a crisis. However, the price has a wide range for movement.

With technological advancements, most commodity trading is online. Many trading sites online have a variety of commodities to choose from, making commodity trading and monitoring simpler.

Step-By-Step Guide

Choose a Site

There are various trading sites that one can use to start trading commodities. However, they all come with different perks and advantages. Some organizations have a wider commodity variety, while others have consultations, easy access, and better rates.

Look at positive reviews and feedback from past users and ensure that you approach a verified website.

Open An Account

After choosing a website to register to, open a live account to begin trading, and marks the beginning of your trading journey.

Many websites offer demo accounts that give nervous traders the chance to experiment and build confidence before signing up.

Choose your Market

Most beginners choose to go with their gut, but you can get some prior research done. Pick an asset within the commodity market on which you want to spread bet or trade CFDs.

Long or Short

After reviewing prices, history, and price predictions, decide if you want to go long or short. Make a Long Position (buying) if you believe prices will rise in the future. A Short Position (selling) is for when the prices drop.

This move has one objective – making a profit from buying lower and selling higher.

Enter a Trade Size

Deciding upon how much to trade per point movement is crucial. Those who learn to trade commodities struggle with setting a limit. However, look at how much a single value is as this varies with the instrument. Compare these rates to your budget.

Risk Management

One of the most crucial aspects of trading and investing is risk management. Most traders opt for stop-loss orders as a risk mitigation strategy. GSLOs or Guaranteed Stop Loss Orders ensure closing out at a set price limit, regardless of market volatility. Although this comes at a low premium price, it is the perfect way to get comfortable with risk.

Moreover, if guaranteed stop-losses fail, they offer a complete refund.

Monitoring

Placing your Trade is the first step in a fun journey. The next step is monitoring the position. The market is an ever-changing phenomenon, and a trader needs to stay on top of it all. This step includes watching over stop-loss orders and profit orders. Doing this can ensure that you know when to pull out. However, keep in mind that sometimes your losses can exceed your deposit.

Trade Closing

Most traders have profit orders that close upon reaching a goal. If you don’t have this in place, close the Trade out when you are ready. This step marks the conclusion of commodity trade.

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