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Commodities Trading: Benefits of trading commodities with AximTrade

It’s been a challenging few months for investors, with growth stocks losing momentum, a wider stock market decline, and cryptocurrency prices plummeting, hindering portfolio growth. But is there any viable asset left to trade? What if I told you that commodities trading has been around since ancient civilizations, with many investors still profiting from it in the modern age? Common examples of commodities trading include Gold, Silver, Crude oil, Brent oil and Natural gas.

The price of oil and gas has been the main headline in recent months, as some commodities have reached record heights over the course of this year. Consequently, this has many attracted investors to the commodities sector, according to Refinitiv, which reports a net inflow of $24 billion (£19 billion) into commodity funds in 2022. Moreover, with inflation at its highest level in 40 years, commodities trading also provides an opportunity for investors to profit from inflation above its rate.

How do you trade in commodities?​

The first step to commodities trading is to understand which commodities can be traded and which commodities should be traded to maximize your profits. As you might imagine, some commodities trade more actively than others.
The Feeder Cattle market, for example, may involve only the farmer and the distribution company, thereby not generating much activity. TradingView reports that Feeder Cattle traded 36,000 contracts in September 2019. It represents the number of feeder cattle contracts that have been purchased and sold. There are, however, numerous companies involved in a market like oil, including public and government-backed companies, service companies, such as BP and Shell, and airlines, who buy and sell oil as a means of reducing fuel costs, as well as speculators. TradingView reports a nearly 14 million contract trading volume for Crude Oil for September 2019 - a significant difference from Feeder Cattle.
As you can see, it is clear that commodities like oil and natural gas have proven to be enormously beneficial, even today when wars are raging over natural resources. Even though it’s possible to trade physical commodities in many forms, futures contracts are the most popular. Essentially, a futures contract allows producers and buyers to agree on a price and terms for the delivery of a commodity in the future.
In commodity trading, the traders bet on the value of the commodity in the future. If a trader anticipates the price of the commodity will go up, he’ll buy certain futures, referred to as ‘going long. In contrast, if a trader thinks the price of the commodity will go down, he will sell some futures, a practice called “going short“. Commodities can also be traded in physical form by buying and holding them. You can use this method if you are looking to purchase gold, or other precious metals, but it isn’t practical when purchasing other commodities.
Read top crude oil trading tips and strategies to learn how to take advantage of the world’s dominant energy source.

Commodities You Can Trade with AximTrade​

AximTrade offers a wide array of trading pairs that enable commodity traders to increase their trading efficiency, as well as their profits. The commodity trading pairs offered by AximTrade are as follows.

Metals:​

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Energies:​

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What are the benefits of trading commodities?​

While there are many reasons to trade commodities, there are three main reasons why commodities are an appealing investment for today’s traders. These include the growing global population, inflation hedging, and portfolio diversification.

1. A hedge against inflation​

It is widely known that inflation reduces the ‘real’ value of a currency over time. In other words, it means that $10 bought you less than 30 years ago, compared to today. Commodities, on the other hand, are subject to price increases in the future, which means it will take more dollars to be able to purchase the same number of commodities in the future compared to the current year.

Furthermore, inflation has reached a 40-year high of 9.1% in the UK, impacting certain types of assets’ returns. When companies cannot pass on higher costs to consumers, share prices may fall if profits are squeezed, and fixed-rate bond income is also reduced by high inflation.

By investing in commodities, however, returns have historically been positive when inflation is high, i.e., returns increase when inflation is high. As inflation measures include prices for commodities such as petrol and electricity in their ‘basket of representative items’, it doesn’t come as a surprise. Hence traders who invest in commodities can protect themselves from these price increases, and potentially gain more profit from their investments in the future.

2. Portfolio diversification​

Financial markets are always going to experience fluctuating levels of volatility at various times of the year based on consumer perceptions and confidence. Since a number of other factors can also affect market performance, including economic, legislative, and corporate factors, it can be difficult to determine which asset is right for an investor. This is where investment portfolio diversification comes into play.

In addition to the different types of assets such as cash, stocks, bonds, and properties, commodities can be considered as another form of asset that can assist investors in diversifying their investment portfolios. Gold can be viewed as a classic inflation hedge since its price tends to rise during inflationary periods and in response to a rise in consumer prices. Unlike other assets, precious metals offer unique inflationary protection. They offer intrinsic value, do not carry credit risk and cannot be inflated.

However, despite the fact that the commodity market typically performs well in times of high inflation, unlike equity markets and fixed-rate bonds, it is crucial to understand the variety of factors that affect commodity prices, including weather, natural hazards, and geopolitical events.

3. Population growth​

Over the last century, the global population has grown exponentially, reaching 7.7 billion today. Although there has been a slowdown in growth over the past couple of years, it continues to rise at around 1% annually.

It can be argued that the growth in population leads to an increase in demand for infrastructure, which is likely to have a significant impact on both the demand for metals and the demand for energy commodities. In addition, the fact that there are more people means there are more mouths to feed, which will affect the demand for agricultural commodities as well.

It is likely that commodities prices will continue to increase over time as there will be more demand for commodities due to the increasing number of consumers.

How to get started with commodities trading?​

Trading commodities is now very simple and straightforward if you choose to do so with AximTrade. Simply open a trading account with AximTrade and take advantage of both the commodity and forex markets with the best trading conditions and lowest capital you can invest.

The spread and margin requirements for commodities trading with AximTrade are among the lowest comparing other trading platforms. Traders are also given access to a wide range of tools and trading instruments in order to execute their trades with an informed perspective. As a result, you will be able to generate impressive earnings and reduce the risks associated with commodities trading.

Original Article: Commodities Trading: Benefits of trading commodities with AximTrade

Disclaimer: This post is from Aximdaily and it is considered a marketing publication and does not constitute investment advice or research. Its content represents the general views of our editors and does not consider individual readers personal circumstances, investment experience, or current financial situation.
 
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