Similar to with the traditional investment market, there are both advantages and disadvantages to trading in particular types of financial vehicles – and this certainly holds true for commodities as well. With today’s volatile markets across the globe, trading in the commodities markets has become quite popular with both traditional retail investors as well as for those who trade in the binary options arena.
One reason for this is investors’ “flight to safety” in valuable assets that are typically based independently of currency. And, while newer binary options traders have had to familiarize themselves with the workings of commodity trades, many have already discovered that trading these financial vehicles via the binary options market is a much easier way to go.
In addition to the ease with which commodities are traded by binary options traders, this particular market has also brought in many new investors due to its lower priced investment alternatives. As the recent flight to commodities has driven up the price of metals, for example, trading these assets in the traditional investment world has become too costly for many traders.
Likewise, while the volatility of prices in today’s commodities market may greatly increase risk for traditional traders, those who trade commodities in the binary options market can incur a set – and known – amount of risk prior to even placing their trade. And, because volatility is greatly reduced, those traders in the binary options market who trade in commodities can place a greater amount of focus on analyzing the potential movements of the underlying assets’ prices.
Commodities Available as Underlying Assets in the Binary Options Market
As in the traditional commodities investment market, binary options traders have a number of alternatives that can be used as underlying assets – although the actual number of different options is pared down a bit in the binary options area.
Some of the commodities that are usually available for trade in the binary options market may include:
- Coffee
- Corn
- Gold
- Oil
- Silver
- Platinum
- Sugar
- Wheat
How to trade commodities effectively
Trading commodities with binary options can be one of the most profitable ways to speculate on price movements in these markets. Traders typically use two techniques to analyse commodity price movements which can be defined as either fundamental or technical forms of analysis. Commodity trading using technical analysis applies the same principles of chart pattern recognition as other financial markets and therefroe does not differ greatly from these in this respect. However, it is worth remembering that commodity markets are very sensitive to events and occurrances which can be seen using fundamental analysis. Fundamental analysts look at the larger factors driving price which so often affect the value of commodities such as global political and economic tensions. The problem for binary options traders is that this form of analysis is usually effective over the medium to long term and therfore is much more favoured to binary options with a lengthy expiry date. For short-term binary options traders, a combination of technical analysis will allow you to identify trading opportunities whilst the analysis of the larger, fundamental trends alongside this will provide an entry on the right side of the market and may also help to avoid any sudden price swings.
Should Investors Trade Mostly with Commodities?
While there are numerous types of underlying assets to choose from in the binary option market, oftentimes traders will focus on just one or two specific assets. This is especially the case for newer traders who are just getting started in this market. Therefore, trading mostly with commodities may make for a good starting point.
With this in mind, specializing in just a few assets can help traders to feel more comfortable in the binary options arena. This trading method can also help traders to try out various different investment strategies and techniques.
Once a trader has become adept at trading one or two types of assets, however, it is a good idea to branch out into other asset categories as well. Similar to with traditional investing, diversifying one’s trades can help an individual to obtain the benefit of many different types of assets. In addition, while there may be times when it is profitable to trade commodities, other economic times and/or climates may prove more beneficial for traders to invest in other types of binary options.
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RISK WARNING: YOUR CAPITAL MIGHT BE AT RISK
