Commodity Trading Investment Strategies

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Commodity Trading Investment Strategies
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• Commodity trading is the buying and selling of
  futures contracts on commodities such as crude
  oil, gold, silver, platinum, palladium, copper,
  corn, soybeans and others.
• A futures contract is a commercial arrangement in
  which a party promises to purchase a certain
  amount of asset at a certain price (futures
  price) on a specific date (expiration date).
• The opposite side of the agreement is sold by the
  other party who promises to sell it at the same
  price and date.

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What to look for when investing in a commodity

• 1. Using Moving Average for Commodity Trading
• 2. In Commodity, the lowest price wins.
• 3. Rising prices are often short-lived.
• 4. Commodity investment options.

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1. Using Moving Average for Commodity Trading

• One of the most popular commodity trading
  strategies is the moving average.
• Moving averages are used by investors to identify
  and analyze market trends as well as support and
  resistance levels.
• Demand and supply rules
• Demand and supply have a profound effect on
  commodity trading. As the demand for an item
  increases, so does the price of that item.
• However, commodity companies operate in a
  completely different way.
• Production is generally the same in every
  specific commodity industry. Cattle are cattle,
  and wheat is wheat.

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• As a result, not all manufacturers are price
  takers and generally cannot set prices.
• Many commodity trading businesses are great
  examples of what is known as a fully competitive
  industry, with many consumers demanding
  homogeneous goods and providers failing to
  provide unique products.
• Price fluctuations are caused by discrepancies
  between supply and demand, which can be caused by
  a variety of factors.

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2. In Commodity, the lowest price wins.

• Commodity companies are price takers who only
  compete on price.
• In general, successful industries produce at the
  lowest prices - they make the most profit per
  unit, and they can keep profits even when
  commodity trade prices are low.
• Companies that produce at higher prices are the
  most vulnerable.
• If prices fall, they will not be able to make a
  profit, and if the market is not fast enough,
  they will have to close their doors.
• Of course, if you are trading commodity prices,
  you should be wary of any one producer.
• However, if the supply is disrupted, the cost may
  increase.

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3. Rising prices are often short-lived.

• Commodity prices fluctuate a lot.
• This can be bad news for companies that make
  these products, as they can raise short-term
  prices or make it impossible for them to survive.
• However, this volatility is not permanent and is
  a common factor in how commodity markets operate.
• Supply and demand for goods remain constant due
  to over-correction due to price volatility.
• If manufacturers do not respond quickly to price
  changes, supply will not grow fast enough to meet
  demand and prices will rise too much for
  consumers.

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4. Commodity investment options

• A futures contract is an agreement to buy or sell
  goods at a specific price on a specific date in
  the future.
• Tangible goods or physical products, such as
  gold, oil or wheat
• ETFs (exchange-traded funds), a fund that tracks
  indexes or other benchmarks, which may contain
  physical goods.
• Commodity manufacturer's stock, or stock of a
  company providing goods or services that includes
  physical goods such as mining corporations and
  oil drillers.
• Commodity ETF, an ETF that invests in the
  equities of companies engaged in the production
  of goods and services, including physical goods.

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Final Words

• We have studied commodities and techniques so far
  and now we will talk about how to invest in
  commodities.
• You can also consult at squareoff.co.in, which
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