How To Start Commodities Trading?
While commodity trading, you will come across hard and soft commodities. The former includes metals and energy products, while the latter comprises animal and agricultural products. Online commodities trading are accomplished via buy & sell of futures or use of ETFs. The online trading platform like adss.com offers both kinds of trading.
Open an account
You will need to open an account on the brokerage platform. There will be some forms you need to fill that include financial details. Sharing financial data is crucial because commodities come with high leverage.
Leverage means the money borrowed from the brokerage platform. There is a possibility of losing more money than you invested. So, the broker needs to check your creditworthiness to determine if they can allow you to work on their platform or not.
The brokerage platform will consider sufficient income, credit, and trading experience. Everyone is not eligible to open a commodity account. The broker carefully evaluates the potential customer’s capability to handle the risk and is suitable for commodities trading or not.
Before you start trading live……..
After you choose a reliable brokerage platform and receive approval, it is time to fund your commodities trading account. Many brokerage platforms have minimum limits set, so you can determine the amount you wish to up it with. Account funding over the minimum limits will depend on your risk tolerance and comfort level.
Before you start trading live with real money, it is smart to open a free demo account on adss.com You get to learn how to place orders, identify technical indicators, detect entry-exit positions, etc. This helps you avoid crucial trading errors.
Even learn how to develop a solid trading plan along with risk & money management skills. Simulation helps to get a feel of how the trading marketplace fluctuates. You get an idea of how to approach the market you desire to trade-in.
When you start trading commodities on the internet, choose trades smartly. Start small and take baby steps – one at a time. If you overtrade from the beginning, you increase the possibility of losing money.
Guidelines for beginners
Options and futures market is a derivative of the real commodities market, where genuine physical deliveries of the commodities occur. A derivative is just security based on physical commodities.
Commodities need research and focus on the supply and demand factor. It is crucial to research fluctuations in the supply & demand for specific commodities. The options and futures market is loaded with risk as these instruments are covered with high leverage. It is a great opportunity to earn huge profits, which are equally accompanied by huge losses.
Trading futures & margin call
Trading futures need a good deposit or maintenance margin. A commodity market is volatile and if your investment value drops a lot, the broker can make a margin call.
A margin call occurs when the broker needs you to add more capital to your account as the value has declined below the minimum equity balance you need to maintain. This trading level is called ‘trading on margin’. It is a risky and pricey way of trading. Many traders have lost a lot while trading on margin. So, do your research and take care while handling commodities.