Commodity Trading Risks And Benefits
The advent of online trading of commodities has been a boon to many investors
. You are now free of the tedious process of calling your futures broker, placing order, discussing the price and then decide to execute or not. Technological tools giving live updates, detailed reports and simplified trading platforms are making huge strides into the rising commodity trading field.
The first foremost step entails, you choosing a genuine, experienced commodity broker. Ensure the broker understands your financial targets, risk acceptance levels and also make sure the online trading platform and tools used by the broker are secure and easily understandable.
Let's look into the various benefits and risks of online commodity trading:
Benefits:
Investors have the advantage of accessing variety of information required to trade in commodities. Live market news, quotes, analytical charts, projections, reports on commodities etc are made available to clients, which helps you immensely.
Most online commodity brokers employ a simple trading platform enabling you to execute orders by yourself, instead of approaching your commodity broker to act on your behalf.
Online trading is usually cost effective and hence brokers charge lesser commissions and fees. This not only reduces your expenses but also allow you to explore multiple strategies viz., spreads, day trading etc.
Risks:
Though online commodity trading enables you to decide strategy and execute orders, your inexperience in futures trading, lack of proper guidance may be detrimental at times.
With live market updates at your finger tips, you may be lured into faulty moves, inappropriate trades and end up with huge losses.
Investors usually drift from their commodity trading plans and get into speculative trading.
You also run the risk of overtrading. Entering into positions for a couple of days to take benefit of the fluctuating markets, lacking proper understanding of markets, prices, commodities etc may end you up with losses.
Online trading may spur speculative and gambling mind-set in non-disciplined investors.
However, with the guidance of an experienced commodity broker and by strictly adhering to your long term strategies, you can mitigate the risks of online commodity trading. Also acquaint yourself with the trading platform to avoid errors in order execution.
by: kellyprice1225
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