By Abbie Jackson
Edited by Simon Piercy

What are commodities and why should you be trading them?

A simple way to explain commodities is that they are just a good or raw material that can be traded. Commodities are interchangeable, this means that crude oil from one producer is the same crude oil as another producer. People have been trading commodity-based trades for thousands of years, locals would use clay tokens as a medium exchange for goats. In the past, commodities would be traded in person – but now we can do it all digitally through software platforms such as Tradecube. 

Everyone uses commodities everyday – your morning coffee, the fuel you use to get to work, the grains you eat at your lunch. Most people don’t realise that each of these assets can be traded. 

 

 Some examples of commodities include:

Soft Commodities:

Wheat, cocoa, corn, cattle, cotton, Live Stock:

Hard Commodities:

Crude oil, coal, energy, metals.

Trading commodities is an important factor in our lives. It can effect your — and can be be traded worldwide. The supply for a particular commodity can depend on a few factors, the majority of the influence in changes usually depends on supply and demand, but it can also be affected by what’s going on in the world –  or even the weather. Because of these constant changes its important to keep on track with your trading. For example, there is a raise in people trying to consume less sugar each day – and this is making the demand for sugar decline each day.

 

“Stock prices can go to zero. Commodities cannot. Unlike shares in a company commodities are real things that are always likely to be worth something to somebody.” Jim Rogers

Commodities of the same grade are considered fungible, which means—– for example ——–

Trading commodities is a great way of —–

For example, Coca-Coola is a branded product that receives loyalty, and a higher price, because of its perceived differentation from other cola drinks. A low-cost store brand is more of a commodity because it isn’t much different from other store brands. It’s bought primarily because of its low price, not its taste. 

 

 

If you’re keen to get stuck into trading or want to find out more, reach us through our contact details below. 

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Article Sources;

https://www.ig.com/en/learn-to-trade/what-are-commodities thebalance.com/what-are-commodities-356089 

Iowa State University. “Commodities Versus Differentiated Products.

 https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/commodities/ 

https://admiralmarkets.com/education/articles/general-trading/trade-commodities?regulator=fca

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