How to Invest in Commodities

Commodities represent another interest type of assets and with the advancement of technology one could invest in them without even owning it. You don’t need to order a hundred barrels of oil and keep them in our home anymore. With online trading, you have instruments that are based on commodities and you are simply buying contracts of value for relatively short period of time.

In this material we will tell you how someone could invest in commodities from the comfort of its home. We will also discuss briefly about what trading strategies could be used and when.

Where can you buy commodities?

At a global scale there are two important places where someone could buy an invest money into commodities. One is the CME Group – operating in Chicago, New York City and London, and offers derivatives like futures and options based on interest rates, equity indexes, foreign exchange, commodities and many others.

The second important place is the CBOE or Chicago Board Options Exchange, where options based on commodities are also available.

Last, but not least, any online broker had included CFDs based on the price of commodities, so anyone is able to trade them with leverage from anywhere in the world.

What strategies are suitable for commodities?

There is no specific type of strategy that had been designed solely for commodities. The traditional ones used for forex or stock trading could be integrated in this market, as well.

However, we have to make a specific remark here. Although you can integrate technical analysis and sentiment analysis + risk management in commodity trading, when it comes to fundamental analysis you will need to pay attention to other indicators.

For example, let’s take oil. Each week, the United States publishes its Oil Inventories. Also, there is the OPEC cartel which had been very active in the last few years due to the drop in prices. It had been changing the daily output and that is another factor which influences the price.

In terms of industrial commodities, one aspect that needs to be highlighted here is that China is the largest consumer in the world, so the economic development in China can influence prices, as well.

There are many other important aspects related to commodity investing and that is why we recommend a thorough study and education before jumping in and invest with real money.