When trading binary options, commodities are going to be among the key underlying asset types that can be traded. It is not uncommon for commodities to be somewhat disregarded by traders, which is a shame because they can present many profit opportunities. Many of these assets are considered to be “safe-havens” for traditional market investors, a fact that can at times make a prediction of their direction of movement a tad simpler to derive.
Commodity price movement is linked to the price movement of other assets, but not always in the way that one might think. When certain asset prices are moving upward or downward, commodities prices may be doing the exact opposite. Investors often turn to commodities when the price of other major assets are erratic. It’s not that the price of commodities are always stable, but due to the fact that they are physical goods that are needed by many, they do tend to hold their value better than other assets.
There are two types of commodities – hard and soft. An example of hard commodities would be metals, which must be mined or extracted before they can be marketed. Because of this, there will always be limited quantities of these commodities available and this will impact the value. Soft commodities are produced by humans and have no limited volume. Examples include coffee, sugar, wheat, and corn. Weather conditions do impact the overall volume of these items, meaning that they can be available in abundance or in short supply.
Regardless of type, all commodities do require effort if they are to be brought to market. Each will require a different time-frame for production or extraction, leading to varying supply levels. Binary options traders will need to pay close attention to supply and demand when trading with this asset class. An over-abundant supply of oil, for example, could lead to a decrease in oil prices. Alternately, a shortage in supply could lead to an increase in prices. Supply data is published on a regular basis, so traders need not guess about the current supply numbers.
There are many different strategies that can be used to trade with this asset class, with the most popular methods being linked to the aforementioned data reports. It is wise to refer to an economic calendar each week so as to know in advance which reports will be released and at what time. An economic calendar will also provide current supply levels, along with the predicted change. When the newly released data is far from the expected total, watch for prices to change quickly.
Each trading platform is likely to offer only a few commodities. There are simply less of these than any other type of asset. This does not mean, however, that there will be a shortage of opportunities. Commodities are bought and sold on a global scale, with many of them being viewed as necessary for daily life. Since they do hold such a high level of importance worldwide, they create many profit opportunities for those who trade binary options.
***Your capital may be at risk. This material is not investment advice.***
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