Time to trade some commodities!

Top 6 and a Half Reasons to Become a Commodity Trader

June 9 by Cristóbal Crespo

If you’re already trading stocks, you might be wondering if you should get into commodities as well… What’s so attractive about being a commodity trader? Well, let us count the reasons…

1. You don’t need to buy and store the physical products. You may be totally confident that the price of beef will rise and want to invest in it. But does that mean you really want to buy a herd of cattle? (Not to mention several acres of land and enough feed to fatten them up for the kill.) But as a commodity trader, you can enjoy a piece of the action without having to keep livestock in your backyard. So when the price does go up, you get to benefit from it as much as any cattle farmer.

2. There’s relatively more transparency when it comes to commodities. It’s far easier to manipulate share prices than commodity prices. Think about companies that indulge in creative accounting or cover up corporate misdeeds. Well, pigs can’t cook the books and soybeans can’t be fraudulent (unless they’re GM soybeans – but that’s a whole different story).

This pig will never be found guilty of accounting fraud

 3. Some commodities are as safe as a bunker. In times of crisis and economic uncertainty, investing in gold, silver or platinum is a smart move. They offer protection against inflation, and are always a good “safe haven” for investors to flock to when the sh*t hits the fan. Even if there’s a war or natural disaster that impacts supply, it can lead to an increase in demand. That in turn can result in a rise in prices, so it can serve as a good counter against risk.

 Got a safe haven?

4. A commodity is forever (almost). Companies go bust all the time. During the tech bubble, there were a lot of companies (like Pets.com) that seemed invincible before crashing and burning. Commodities are exempt from this type of risk. While we may run out of precious metals one day, it’s nearly impossible for demand for, say, platinum, to ever drop to zero.

The demand for hot dogs is also infinite…

5. There’s no competition. There’s simply no substitute for gold. When it comes to stocks, it’s a whole different ball game. For instance, if you were to invest in BMW, you would need to also research competing automakers, as well as tech companies that are venturing into autonomous driving, yadda yadda… But when it comes to gold, you just have to follow the news for general economic issues since these are the main drivers for the price of gold.

Take a chill pill and just follow the news

6. There’s no correlation between commodities of different classes. Share prices may move in relation to the trend of the index or sector. For example, if cloud computing is suddenly declared ‘dead,’ this would not only hit Amazon but other cloud providers like Microsoft, IBM, Cisco and others. But when it comes to commodities, whatever happens to corn or propane will have no effect on gold. So it could be good to add a little diversification to your portfolio with commodities.

 A domino effect is unlikely with commodities

6 ½. You can trade virtually any commodity you can imagine. Cheese, frost, sunflower seeds? Or how about getting into cannabiz? In the US, there’s a marijuana commodity exchange – though the actual product itself isn’t even legal in all the states!

 

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.3% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.