Those, who are new to the art of market speculation and want to learn about financial assets and how to trade should first understand what commodities are. It is a resource or an asset with monetary value that can be sold or brought. For instance, the United Kingdom exports plenty of gold, petroleum, and platinum, which they considered commodities. Most traded commodities in London, UK can be performed both physically and online. Let’s read further to learn about it in detail.
What is commodity trading?
Commodities are usually described as raw materials. However, brokers, buyers, and sellers, alike are broadly termed carriers. A fair example of this is cryptocurrencies, digital assets with no physical form. Processed resources and goods like refined gasoline or heating oil are also considered commodities. It includes gold, silver, or unprocessed iron ore.
Commodity trading is the act of buying and selling assets, resources, and often raw materials, with monetary value. People can trade commodities over shorter or longer periods of time. Usually, day traders perform trade online within a short span of time. They avoid physical commitment to products and speculate on regular price movements.
Commodities that you can trade in London
You can trade a plethora of commodities in the UK. They are categorised in the ways given below:
- Agriculture – These are the goods that are collected and produced through farming methods, livestock, grains, fruits, and various confectionery products are examples of agricultural commodities.
- Metal – Metal commodities are divided into two categories, namely, precious metals and common metals. While gold and silver come under precious metals, copper is considered common metal because of its relative abundance.
- Energy – Physical goods that you can use to generate power. Electricity, crude oil, and natural gas are considered commodities.
- Cryptocurrency – Cryptocurrencies are frequently considered a commodity. However, they have no physical counterpart.
- Environmental – The things that are called non-tangible energy credits are environmental commodities. The value of such commodities relies on the demand for cleaner energy production.
How to trade commodities in London
Mostly, all the commodities are tangible, which means they can be brought, sold, and held in your hands. However, the ways to handle them are relatively contradictory. Most of the trading methods in the UK do not involve handling goods physically. They provide an opportunity to speculate and bet on the direction and intensity of price movements.
Contracts-for-difference (CFDs) are relatively popular in London. The country has banned cryptocurrency CFDs and all other crypto derivatives for retail clients. Although you own a particular amount in ETFs, shares, and mutual funds, they are still considered intangible financial products.
The ways to own a physical commodity are via exercised options or futures contracts, as well as precious metal bullions. They are the dealers that mostly offer precious metal bars, ingots, and coins. This commodity that you can buy and own outright. Options and futures contracts also allow you to exercise the right to purchase a physical product, including a barrel of Brent crude oil. But, the physical ownership of a commodity includes transport and storage costs that several retail investors cannot invest their money and time for.
Trading strategies are entirely known for risk tolerance and profitability as a consequence. There are no single strategies available that are suitable for every marketgoer. However, it is significant for you to have one. Moreover, strategies vary depending on the location and the type of commodity you trade. Ensure to have well-defined parameters to which you are exposed while trading. Using the above ways, you can trade the appropriate commodities well in the London market.
The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision. London Loves Business bears no responsibility for any gains or losses.
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