Before you start to trade commodities online, you first need to build a foundation of knowledge about what commodities are. Once you have a firm grasp on the different types of commodities you can trade in, then you have overcome the first huddle. In short, commodities are the raw material, such as metals, agricultural products and energy. Primarily, all commodities fall into one of three main categories: Tradability, deliverability and liquidity.
Tradability
The first characteristic of a commodity is its tradability factor. Tradability means that the product or item has a value associated with it that someone is willing to trade the commodity for your money, or is willing to pay you money for the commodity you own and want to sell. Simply put, if you trade a particular commodity offline or online, such as trading commodities online with UFX, the recipient will be more than willing to give the equivalent value of your product.
Primary examples of commodities include, but are not limited to:
- Silver
- Gold
- Uranium
- Coffee
- Foreign currencies
- Wheat
- Oil
Deliverability
The second characteristic of commodities is the ability to deliver the product. In other words, the product must be tangible and/or have a way to be transferred from the seller to buyer. For example, gold is delivered in bars. Oil is delivered in barrels. Both of these are examples of the deliverability of commodities. In many circumstances, the physical product is not delivered when bought or sold, but the point is that it could be. For example, when investors buy gold, they probably won’t choose to have gold bars delivered to their home, but if they want to, it is an option.
Liquidity
The final characteristic that all commodities share is liquidity. Liquidity means that the commodity is easily converted into cash, or it is easy to buy and sell. Liquidity is the characteristic that makes trading commodities with UFX such a dynamic market. Commodity prices change on a daily basis and typically change throughout the day. Generally, when trading in commodities, it is something that you have to stay on top of over trading in stocks or other types of investments.
The basics of commodities require you to learn what makes a commodity a commodity. Once you learn the primary characteristics of commodities, it makes it easier to understand what a commodity is and what makes it a valuable investment option. Once you start building a basic foundation of knowledge, then it is a viable option to trade commodities online. Ultimately, trading commodities online is one way of earning a return on your investment.
About the Author: Milford Quandel is a finance specialist who loves studying the commodities market. Before you begin trading commodities online with UFX or any other group, make sure you have a firm understanding of the market and how it works. Seek the advice of a professional if you aren’t sure of what to do next.