There are no other financial markets anywhere, that require such a deep and detailed knowledge across a broad spectrum of issues, from global weather patterns, supply and demand issues, currency fluctuations, government policies, economic outlook, and environmental issues. All of these, and many more besides, will have an impact on the commodity you trade, and commodities prices in general, and the depth of your knowledge will largely dictate whether you are ultimately successful in online commodities trading.
This is not a market or sector that you simply open an account with an online commodity broker and begin trading – there are simply too many factors at play, particularly when we begin to look at the so called ‘soft commodities’ from the agricultural sector such as wheat and corn. To forecast the futures price, we need to consider all the factors which are likely to influence the market, which can include any or all of the following; the weather, disease, growing demand, the US dollar, export policies, import policies, and environmental issues such as bio-fuel and renewable energy sources. All of these will have an effect.
For the hard commodities and metals, we have a different set of factors to consider, with the ultimate safe haven status of gold, often closely associated with the risk on, risk off, appetite of investors, resulting in a close relationship to equities and the fortunes of the US dollar, along with the performance of treasuries and bonds. Silver of course, is an industrial metal, and whilst having a correlation with gold, also takes it’s lead from equity markets, which in turn dictate likely future demand for the commodity.
Crude oil of course, is another of the world’s leading natural resources, which is not only subject to many of the above factors, but also has a further unique, in the price manipulation regularly exerted by the OPEC group, as it seeks to leverage prices and control supply for its oil member states. To be successful in crude oil trading you have to understand this relationship, and many others. This is what makes online commodities trading such a challenge, and in many ways can be likened to a thesis or scientific study, since much of the analysis in not on the monthly or weekly price chart, but in your underlying assessment of the broader factors affecting the commodity in question.
Of course to start trading you need a reliable trading platform first. Our recommendation goes to the IronFX company, an award wining platform with ten different trading platforms for different commodities such as forex, precious metals, futures, cryptocurrencies and more. Visit their website to learn more.