Commodities
Commodities play a crucial role in the global economy, as they form the basis for the production of various goods. For example, oil is an important commodity used for energy production, while metals such as aluminum and copper are essential for construction and industrial processes.
What are commodities and how can you trade them?
Commodities are natural resources used in the production of goods and services. These materials can be divided into two main categories: soft commodities and hard commodities. Soft commodities include products that are grown, such as grain, sugar and cotton, while hard commodities include non-renewable resources such as oil, gold and metals.
Commodities are often traded on exchanges, where the price of these materials is determined through supply and demand. The exchanges provide an organized marketplace where buyers and sellers can meet to trade commodities. This helps to establish standardized contracts that specify the quality, quantity and delivery time of the raw materials.
Some of the most well-known exchanges for commodity trading include the Chicago Mercantile Exchange (CME), the New York Mercantile Exchange (NYMEX) and the London Metal Exchange (LME). These exchanges provide an international forum for trading commodities, and the prices set here can influence world markets.
Like the stock market, the commodity market allows investors to buy and sell contracts based on expectations of price changes. Investors can take advantage of price volatility and speculate on price movements to make a profit.
It is important to note that commodity markets are also exposed to various risks, including price volatility, geopolitical events, weather conditions and supply and demand factors. Therefore, it is necessary for investors to carefully assess the risks before participating in commodity trading.
You can gain indirect exposure to the commodity market by investing in shares of companies involved in the production, extraction or distribution of commodities, investors gain indirect exposure to the commodity market. This can include companies in mining, oil and gas production, agriculture and more.
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Variable ratio between commodity and stock
The relationship between the price of commodities and shares can vary. Sometimes the prices of commodities and stocks will move in the same direction, while at other times they can move in opposite directions. It is important to research the specific company and its exposure to commodity prices before investing.
Hedge against portfolios
Some investors use commodity stocks to hedge portfolios. This means that they invest in these stocks to protect themselves against possible losses in other parts of the portfolio when commodity prices change.
Overall, commodity stocks offer investors the opportunity to gain exposure to the commodity market in different ways, with different benefits and risks. It is important for investors to carefully consider their goals, risk tolerance and investment strategy before choosing between these options.
At Hero Markets, you can choose from dozens of commodities to trade, both in the app and on PC/Mac.
Other Markets
Forex
Forex, also known as Foreign Exchange or the foreign exchange market, refers to the market where different currencies are traded. This market is the largest and most liquid financial market in the world, with a daily trading volume of billions of dollars.
Crypto
Since 2009, cryptocurrencies have entered the markets. Generally stimulated by investor interest, technological development and availability on eWallets, crypto has experienced the highest volatility in the markets regardless of asset class.
Indices
Index trading provides an opportunity to trade in the financial markets without the need to invest in individual stocks separately.
Shares
Equity CFDs represent a derivative contract that allows investors to speculate on the price movements of a particular stock without actually owning the stock.
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