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.

There is no doubt that technical analysis is one of the most popular when we talk about online trading. However, even though there are a lot of methods using technical analysis which can be profitable in the run, still, most of the traders fail to understand it properly.

With that being the case, we want to explain a bit how someone could start using technical analysis in such a way that in the long run one could constantly develop skills and achieve the desired results.

Since technical methods are very popular in the forex market, we will stick to it and leave other markets for a future material.

Each technical indicator has its role

There is no indicator better than the others and you will find weak points for each one. What is sure, though, is that each one of them functions in a different way and thus you would need to test them (preferably on a demo account) in order to experience yourself various situations and notice how a particular indicator behaves.

The issue of time frame

Whether you should use a small or big time frame for technical analysis is another dilemma. From a statistical point of view, most of the strategies are performing better on higher time frames, but also, an experienced trader will manage to use them effective on small ones, as well.

Since this is a material for those who are at the beginning, you should pick up 3 different time frames (like 1h, 4h and daily, or 30min, 1h and 4h) and learn how to work with them jointly. This system was described in greater detail in Alexander Elder’s book “Trading for a living”, which is a good lecture if you want to go deeper into the online trading knowledge.

Not too many indicators

An overcrowded chart will stop you from seeing some of the price particularities. Instead of that, try to stick to around two indicators that you like and you have understood the best. Maybe you want to use Bollinger Bands and Stochastic, or maybe you like Fibonacci levels the most. It is up to you to choose the one that you like the most.

Don’t forget that there is no magical technical indicator and the key is to find the things that work the best for you. There’s no point for searching the “Holy Grail” because you will never find it.