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Online commodity trading

Online commodity trading is a market I know well, as I trade in a variety of commodities daily, and have several sites dedicated to the most popular which I update daily with my regular forecasts and analysis based on my own trading. Whilst commodities trading is considered a specialist field, it is no more complex or risky than any other form of online trading, providing you understand the commodity you are trading, as well as trade with the relevant risk and money management rules in place which are common to all forms of online trading. The three principle markets that I trade are oil, gold and silver, all very different in their own way, and one of the biggest mistakes that new commodity traders make, is to assume that gold and silver are both precious metals – they are not – gold of course is classified as a precious metal, but silver surprisingly, is classified as an industrial metal where it is used in specialized areas of industry and manufacturing, particularly in the motor industry and electronic sector.

In terms of the software and trading platforms that I use, my trading platform of choice is Metatrader MT4  ( now MT5) , simply because it is the one supplied by my broker and over the years I have become very comfortable in using this platform for most of my online trading. Order entry and execution is extremely easy, and stop loss management is almost instantaneous, allowing trailing stop loss orders to be moved quickly when day trading, and in my view is the best day trading software to use as a result. The commodity broker I use at present guarantees no re-quotes, and offers minimum trade size on oil of 1 contract or $1 per tick, with the spread being the transaction cost. The target spread on oil is normally around 0.5 on the WTI contract that I trade regularly. There are of course many ways to trade in the commodities markets including online futures trading, spread betting, binary betting and fixed odds, all of which I have covered in detail on several of my other sites, so please do check there if you would like further information on how to trade commodities, using these more specialized techniques.

Gold Trading

Gold is one of the only commodities whose gross ‘above ground’ tonnage continues to grow year on year, as the commodity is rarely consumed, and therefore creates one of the great anomalies in commodity trading, in that its value continues to increase in real terms, as does the overall quantity in vaults and jewelry around the world. Almost every other commodity, such as oil, silver etc is consumed, and in the case of oil ( as with many others), the world’s supply will eventually run out, with the price driven ever higher as a result. The price of gold on the other hand, does not correlate with supply and demand, since it is not consumed, and its price is therefore reflected in the risk appetite of investors when compared with other forms of investment. Gold is considered to be the ultimate safe haven, and as such, when stock markets fall sharply, or principle paper currencies come under pressure, such as recently with the US dollar, then gold becomes a safe haven as a result, with the price increasing sharply. Whilst the US dollar and more recently the euro, retain their first reserve status for currencies, gold is still considered to be the ultimate physical currency, and even though the gold standard no longer exists in the currency markets, the precious metal retains this mantle even to this day. If you would like to read my daily analysis for gold trading, then simply follow the link here.

Oil Trading

Oil trading is very different to trading gold, and as I outlined above, crude oil prices are governed to a much greater extent by the supply/delivery relationship, as well as any ongoing geopolitical or economic crisis, which may dominate world events. In addition, oil prices tend to have a seasonality, with issues such as the driving season in the US, and of course global weather conditions playing their part, with consumption increasing in cold weather in markets such as heating oil. The weekly oil stats will also have a dramatic effect in the short term on the oil price, and depending on whether we are seeing a build in oil prices, or a decline in stocks at Cushing, then again this will be one of the short term factors affecting the day trading prices. Finally, within the mix of factors affecting oil prices, we have OPEC, the ultimate cartel, which meets regularly to control the supply of oil from its member countries, which in turn affects oil prices. If you would like to follow my daily oil forecast then follow the link here, and to learn more about trading oil, then I have included the link to the site.

Silver trading

As I mentioned above, silver is classified as an industrial metal, and not a precious metal, as it is widely used in industry in a variety of manufacturing processes. As a result, the broader economic outlook has a much greater impact on the price of silver, since the performance of the stock markets and companies in general will dictate whether silver is in demand, and therefore the metal tends to show some correlation with world equities. However, in addition to this correlation, silver prices have traditionally correlated with gold, generally rising faster as gold prices rise, but falling faster when the precious metal falls. This correlation has stalled recently, but now appears to be established once again, as gold prices begin to break out into new high ground with silver prices following as a result. Again, if you would like to read my regular silver trading analysis then simply follow the link here to the site.