Commodity trading is the buying and selling of contracts of items that we use every day. It is the trading of primary or raw products.
Popular items traded in the commodities market include various items that we use in our daily lives like soy beans, cotton, cocoa, sugar, wheat, corn, orange juice, barley, pork bellies, milk, , meats, poultry, fruits, hay, vegetables, other beans and eggs.
Oil, natural gas, electricity, and gasoline are common but important energy items that are traded in the commodity markets. Buying and selling of commodities is very similar as we buy stocks and bonds in the stock market but commodity trading involves much more risk.
Commodity trading is very speculative because of its volatile nature. It is designed only for some of sophisticated investors who are able to bear the loss of more than their entire investment. This trading is not for the investor with a weak heart!
However, commodity trading is a type of battle between return and risk. Because of the leverage involved. You can achieve a higher rate of return than from most other forms of investment, but at a higher risk by keeping your heart strong.
Why invest in commodity trading? You invest because:
Commodity trading of futures can bring huge profit, in short span of time.
It is easier to buy and sell them because of the good regulatory system formed by the exchange.
There is no company risk involved, when it comes to commodity trading as opposed to stock market trading. Because, commodity trading is all about demand and supply.
With the evolution of online trading, there is a dramatic growth seen in the commodity trading, when compared to the equity market.