Commodity trading is the backbone of the global trading ecosystem today. Energy and metals are essential to the production of various products, and agricultural commodities supply international food markets. They are among the most traded commodities, and their price movements have a global impact.

Commodities can be divided into four main categories:

Agricultural commodities. These include food crops (cocoa, cotton, corn, coffee, etc.), livestock (pigs, cattle), and industrial crops (such as palm oil and lumber).

Energy commodities. These include natural gas, crude oil, and gasoline, coal and uranium, ethanol, and electricity.

Metal products. This category includes base metals (copper, iron ore, zinc, aluminum, nickel, steel, etc.) and precious metals (gold, silver, palladium, and platinum).

Green commodities. These include renewable energy certificates, carbon emission certificates and white certificates (certificates that a certain reduction in energy consumption has been achieved).
In the past, commodity trading was dominated by multinational conglomerates that purchased raw materials for production, as well as large banks and trading houses. With the advent of online trading, private traders with relatively modest capital have gained access to global commodity markets.

Commodity trading has become a popular means of hedging against inflation risk and diversifying a portfolio. For many traders and investors, commodity trading is a preferred way to protect funds and reduce the overall risk of their portfolios.

At the same time, commodities are not immune to sharp price fluctuations. It is always worth remembering that prices can suddenly change direction against your trade, resulting in losses.

What is commodity trading?

Everyone has heard of stock trading, but commodity trading is much less common. What is it? Commodity trading is a way to diversify your investment portfolio by buying and selling raw materials such as oil and natural gas, base and precious metals, and agricultural products including wheat, coffee, and sugar.

Traders speculate on the future value of commodities, seeking to profit from price fluctuations. Note that higher volatility makes commodity trading risky, as the price of commodities can suddenly change against your trade, causing losses.

Some traders seek to hedge against inflation by trading commodities. The assets in their portfolio may increase in value as the price of commodities rises.

Commodities that are traded internationally tend to have several common characteristics:

• Natural resources that are needed by most countries or regions
• Limited geographic sources
• Price volatility
• Quality/specification standard

Commodity prices are largely determined by numerous factors that can affect supply and demand, such as economic activity, seasonality, weather, and geopolitical events. Major supply disruptions or problems with new sources of production can cause commodity prices to spike or fall sharply.

We wish you successful trading with ArtCap !