Commodity Trading with Crypto — A Beginner’s Guide in 2020

Commodity trading is one of the most popular types of trading in the world, however, few really understand the influence that commodities have on the world and the financial market at large.

TradeConnect
Sep 3 · 6 min read
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A beginner’s guide to commodity trading with crypto on TradeConnect

We are all consumers of commodities and we interact with them almost every single day of our lives, whether it’s in the form of your daily coffee, the gas in your house, the oil in your car, or the gold or silver in your jewelry. However, what you may not have known is that these products are traded in the global financial markets for a profit.

In the latest of our series of beginner guides, we will take a look at what commodity trading is and review the overall fundamentals of the commodity market in order to provide you with a solid beginner level understanding of how you can begin trading commodities using cryptocurrency on the TradeConnect network.

We will cover:

So let’s dive into this overview of commodity trading to find out more about one of the most popular trading markets around the world.

What is a Commodity?

A commodity is simply a basic good or raw material that can be grown, extracted, or mined and can be bought or sold.

Commodities are an example of a fungible asset, which is a word you may have heard a lot about in the crypto world, think Monero! In this sense, fungibility simply means that the commodity possesses attributes that remain the same throughout all of its life. Irrespective of whom you buy your commodity from, it will always be the very same product and thus priced the same anywhere in the world, excluding local taxes or transportation.

Examples of traditional commodities include gold, oil, wheat, sugar, grains, coffee, and even natural gas.

What is a Commodity market? A commodity market is simply a physical or virtual market for the buying, selling, and trading of raw or primary products.

What is Commodity Trading?

Commodity trading is the process of speculating on the increasing or decreasing price of commodities within a digital trading market which ultimately makes the speculator a profit or a loss.

Trading commodities can be an important way of diversifying your trading portfolio as commodities tend to move in opposition to the stock market and therefore you can hedge your risk. Other traders choose commodity trading as they like the market volatility associated with commodity trading. Whatever reason you decide to trade commodities, commodity traders must be quick to react to market-moving events.

In its most simplistic sense, the basic principles of supply and demand are what drives the commodities markets and thus the value of a commodity. If the commodity becomes scarce (or demand goes up), the value also increases. If the commodity becomes plentiful (and/or goes down), the value also decreases.

Advantages of Commodity Trading?

Commodity trading is attractive to traders for quite a few different reasons.

What are the 5 Major Commodities you can Trade?

The 5 major commodities that you can trade include:

What is the difference between hard and soft commodities? You may also come across the terms hard and soft commodities when you start researching commodity trading.

Hard commodities are simply natural resources that must be mined or extracted such as gold, silver, rubber or oil reserves. Hard commodities are not perishable and therefore are easier to store than soft commodities. They are also less vulnerable to volatility in the short term, although there are anomalies to this such as the oil crisis at the beginning of the Covid pandemic. In general, the prices of hard commodities are more dependent on global macroeconomic fundamentals such as interest rates and GDP growth.

Soft commodities, in contrast, are anything of an agricultural nature or livestock. Soft commodities have a shelf life and can fluctuate quite dramatically as they are subject to additional external forces that determine and impact their overall supply and demand such as the weather.

Top 10 Most Traded Commodities in the World

Whilst the list changes over time, ten of the most traded commodities include:

1. WTI Crude oil

2. Coffee

3. Natural Gas

4. Gold

5. Brent Crude Oil

6. Silver

7. Sugar

8. Corn

9. Wheat

10. Cotton

What Drives Commodity Prices?

Even for the most experienced traders, commodity trading prices tend to be the most volatile and unpredictable of all other major tradable assets. This is primarily due to the fact that commodities are extremely sensitive to changes in the global macroeconomic landscape.

Every single commodity has its own unique characteristics and influences that affect its individual price.

In the short term, commodity prices are affected by weather, interest rates, and speculation. In the long term, commodity prices are affected by the underlying fundamentals such as supply and demand which is mostly impacted by income, population growth, technology and the actions of governments around the world and producer organizations, such as OPEC.

There are a number of different things that drive commodity trading prices both up and down, these include:

Which Commodities can you Trade on TradeConnect?

On the TradeConnect multi-asset trading network, you can trade the following commodities:

Energy Commodities:

Metal Commodities:

Why Start Commodity Trading on TradeConnect?

There are many reasons why you should choose TradeConnect as your platform of choice to start trading commodities. Here are just a few:

How to Trade Commodities with Crypto on TradeConnect?

To get started with commodity trading using bitcoin (BTC) or ethereum (ETH) as your margin currency, all you need to do is:

That’s it.

To get started trading commodities, you can download the TradeConnect app from the App Store today!

TradeConnect

We connect crypto traders with global financial markets

TradeConnect

Written by

The multi-asset trading network that connects crypto traders with global financial markets using bitcoin and ethereum as collateral.

TradeConnect

TradeConnect is a multi-asset trading network that connects traditional financial markets and cryptocurrency markets into a single, easy-to-use digital trading platform where you can use bitcoin or ethereum to trade Forex, Stock Indices, Commodities, Crypto and Futures markets

TradeConnect

Written by

The multi-asset trading network that connects crypto traders with global financial markets using bitcoin and ethereum as collateral.

TradeConnect

TradeConnect is a multi-asset trading network that connects traditional financial markets and cryptocurrency markets into a single, easy-to-use digital trading platform where you can use bitcoin or ethereum to trade Forex, Stock Indices, Commodities, Crypto and Futures markets

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