Investing & Trading in Commodity Futures an overview.
Investing & Trading in Commodity futures these both are the popular terms of US commodity market, we are free to act as an investor as well as an trader during buying and selling our trading contracts. The main difference is that the trading can be done for short term as well as for long term too. But when we talk about the investment then in that case we has always a long term goal in mind, where we don’t do much changes in our plans and just hold our trade for a long run.
1.Commodity Trading: Commodity trading is called as an action where buyers and sellers are participating to make a buy on low and make a sell on high within an aim of profit. This is one of the prior rule of any financial market that buying in dip and selling on top should be our first priority as a trader. The use of differ kinds of technical chart patterns can be seen during the trading, along with it we concentrate on trend analysis, price action, moving average, trading tools etc to. The understanding of price movement does also come up from the behavior of big players or commercial traders of the market for that mostly trader’s like to go with price action techniques. The term trading is not limited and can be done in so many ways for example short term trading, long term trading etc.
2.Commodity Investing: Commodity investing is related to a term called investing, where we are investing our money for a long term goal, though the use of common understanding of market trend is still important during investing in gold,silver or in other commodities. Because if have a good idea to catch a uptrend on the right time then you can earn a good amount of profit as a long term goal from that specific long run contract. Hence the understanding of a few technical aspects would be necessary before investing in commodities.
Major Differences between Commodity trading and Commodity Investing:
- Brokerage: This is so common to understand during the trading we has to open and close so many order’s (short term as well as long term bases) compare to an investing approach which can lead to the problem of paying brokerage, hence in trading we have to pay more brokerage than compare to the commodity investing.
- Trend Analysis or Market Analysis: There is a saying that “Trend is our Friend” and this is really a true thing which indicates that in future what kind of possibility we can expect from a market direction. We believe that in investing approach following and finding a trending would be more easier compare to trading, because investing is a long term approach where we does mostly concentrate on long term time frames analysis.
- Massive Profit: If you are looking to make a massive amount of profit from one single trade or few trades then trading with an investing approach would be one of the best approach to make money, here we want to take an example of crypto currencies, everybody is well known to this that 8 years back bitcoin price was very lower may be in cents or few dollar’s but today its near of becoming one of the top leading virtual currency in the world. On the other hands big profit possible from trading also but a long term market and experience required for that at first.
- Patience: Patience is an very important part of any financial market sector, and here also in commodity market trading we have to follow this term called patience, especially in long term investment we need an longer patience compare to trading. Because market is nature is not only volatility, it has three parts uptrend, downtrend, and sideways hence this become prominent to keep patience during as an investment goal, on the other hand trading can be down for short term also but its does not mean patience is not required there, its need but less compare to an investing approach.
- Time spending: Our trading approach is more time consuming compare to the investing in commodities, the term investing is related to a long term holding approach and there is no need of changes over there during the holding period, but in a trading approach we have to watch out so many things before the trading, during the trading, after trading etc. Which does make trading more time consuming than the investing in commodities.
- Skill & Experience: Regarding the skill and trading experience we would like to say that in commodity trading we should have a great amount of trading skill and experience because without these it will not be possible to earn consistent profit from the market, but on the other hand in long term investing we need less skill compare to a trading skill. We believe that in long term holding investing strategy a market trend analysis approach would be one of the best approach for investor’s.
Which one is best Commodity Trading or Commodity Investing?
This is so hard to tell that which kind of approach would be better for you, actually it’s depend upon a character also, if you have enough time for your trading and learning then for sure you can do full time trading in commodities even part time can be don too. But if you have a busy schedule through out the day then you can take commodity as an investing approach also.
Furthermore there are so many people who likes to work upon both, they do trading as well as investing both in commodity market. Hence its depend upon us that how we handle out these all things, we can do trade as well as investing both here in this commodity market. But if you don’t want to go with trade then for sure the other option is waiting for you that is choosing commodity market as an investment. Buy at bottom sell at high, and sell at high and buy at bottom once again, as an investor our approach should be differ than the commodity trader’s.
Hence it does not matter you are a trader or an investor, commodity market principles would be same for all of you. Keeping patience, a good use of money management, risk management, a proper trading psychology, a good trading plan, all these are crucial to make your trading or investing plan effective at the end in commodity market. Hope you liked the content thanks for reading.