In a similar fashion to trading forex pairs, trading commodities follows the principle of buying and selling the contracts for a set amount of a commodity in hopes of generating profit. Commodities are essentially the raw materials we use for everything –from food to energy. On the forex market, traders tend to follow Oil, Gold and Silver, as well as other commonly-traded commodities, attempting to generate profits on their fluctuations in this highly volatile market.

Why is this market more volatile?

Aside from the usual forces of supply and demand that heavily influence any market, the commodity market is perhaps just as heavily influenced by political, economical and agricultural factors. For example, oil prices, regardless of supply or demand, are also directly affected by the political and military situations of the countries that produce oil, just as Agricultural commodities are reliant on weather. This makes fundamental analysis doubly important for traders hoping to increase their profits. Just as important, however, is timing – responding to breaking news in time could mean plenty of profitable trading opportunities.

Why trade commodities?

Use the news to your advantage! Since you are essentially trading contracts for the commodity, and not the physical commodity itself, you can benefit from fluctuations in commodity prices from the comfort of your own home using your favorite trading platform. Next time you read about the price of gold rising, or hear a piece of news that you’re certain will impact the price of wheat, make this information work for you by adding commodities to your daily trading.