Compared to forex or equity trading, the commodity market is still little known. In fact, the potential benefits offered by commodity buying and selling transactions are no less great than what you might get in forex trading. Accorfing to Investopedia, commodity trading in the exchanges can require standard agreements so that trades can be confidently executed without visual inspection. Then, what are the advantages of commodity trading?
Let’s check out these 5 advantages of commodity trading:
Appropriate Margin Requirements
In commodity trading, you should adjust the specified margin requirements to the characteristics of each commodity. For example, in gold trading, you should set at USD 1000 for 1 lot as a minimum margin. While for oil commodities, 1 lot has a minimum margin of USD 2000. Thus, you can maximize your trading potential according to the type of commodity instrument you choose.
Not losing value
A uniqueness that only assets possess in the commodity market is the valuation of the actual price of the commodity. For example, if the value of a currency or stock may fall or become worthless due to economic turmoil or the stock company is bankrupt, this is not the case with commodities.
One gold bar, for example, will not lose its price. Likewise with silver and oil. Although the buying and selling prices will fluctuate, your commodity assets will always be valuable and tend to experience price increases as the mineral reserves decrease on earth.
The nature of commodity goods that are needed by industry and consumers around the world makes liquidity very high. You will have no trouble finding buyers of your commodity assets when trading online.
If you want to diversify your investment portfolio, then valuable commodities such as gold, silver, and oil are the right choice. You can trade these items in different markets because they have different risk characters.
If your investment in the financial market is disrupted, you can secure your assets and funds in the commodity market, and vice versa.
Moves Based on Fundamental
Commodity markets have movements based on changes in the fundamental prices of these goods. Thus, you can do a fundamental analysis more accurately.