9 Most Traded Commodities of the World: Commodities are the most volatile tradable instruments, so it is best to invest in a commodity that is traded in high volumes because as the price shift occurs then more profit can be generated by trading in that commodity.
Commodities are traded, keeping in mind the concept of demand and supply. So, as the market for a commodity increase, the prices also surge. Likewise, as the supply of commodity increases more than the need, then the costs go towards downswing.
So, Commodities are the base of any economy as their produce and sale govern the income of a nation. Commodities are broadly classified into two categories, i.e. hard commodities and soft commodities.
Hard commodities are those that are found in nature, i.e. oil, metal etc. they are either excavated or mined from the earth.
Soft commodities are those which are procured from crops and live stocks like, grains, seeds, milk, meat, and other agricultural products.
One can be benefited by going short or holding for long too. Suppose as the commodity prices are declining in commodity markets, then one can buy commodities for fewer rates, and when the demand soars, he can quickly sell them at once to gain high profit.
World`s best commodities that are available for trade are Gold, oil, steel, soybeans, iron, corn, copper, aluminium, coffee, silver. These are the most tradable commodities in the commodity markets.
So, as we have gathered the basic idea of what a commodity is, now let us discuss the most tradable commodities around the globe.
1. Oil –
Trading of oil falls on number 1 among top tradable commodities because it is primarily affected by the rule of demand and supply.
Crude is a hydrocarbon made of hydrogen and carbon complex chain structures. This crude oil is the raw product for the manufacturing of several petroleum products like cosmetics, diesel, glycerin, gasoline etc.
Middle East countries are the top suppliers of crude oil, and they are responsible for the change in their prices. Now how are they accountable for price variations? Suppose there is a coup and rebels grab the rinse then there is the hike in prices due to instabilities, and this hike reflects in commodity exchanges also.
Due to its volatility, it opens avenues for profit makers by trading in it. Crude is trading with different names in different commodities exchanges like for example it is traded as Light Sweet Crude Oil in the Mercantile Exchange of New York exchange and as Brent Crude in London.
The price of this crude oil is also affected due to seasons. For example, in summers its demand goes up due to high driving, and in winters its market goes up as in the form of hot oil.
Crude oil is traded in American Dollars, and the quantity is measured in the barrel.
Also, despite the hovering peril of oil may go extinct and alternative resources of power and energy, investors are showing their firm belief on it and trading with keeping all precautions considering the volatility of the commodity.
2. Aluminium –
This is also the most tradable commodity as its demand is high in industrial markets. It is lightweight; hence it is used mostly in manufacturing industries like car manufacturing, electronics and aeroplane manufacturing and other metal things for home use.
China is the largest producer and consumer of aluminium.
So as we have seen, it is a versatile and lightweight metal; hence its demand and supply are continually fluctuating, and that opens the opportunity to make a profitable deal.
Choosing aluminium is a good option for trading as it gives good price fluctuations and hence more chances to enter and exit with profits.
It is traded In a lot of 5000 kilograms.
3. Nickle –
High ductility yet corrosive resistance and its assertive behaviour make it a high demanding metal of the steel industry. It is one of the highest demanding metals in the industry.
Nickle has a corrosion resistance property; hence it is blended with iron to make very high-quality steel that is used to make utensils and high-quality lightweight parts of machinery.
Due to its high demand, it shows the volatility in the market. Hence, there are good chances of trading in this metal.
This metal is traded in a lot of 250 kilograms in the London exchange markets, and it gets mostly sold in the markets that have high acceptance of Nickle.
4. Copper –
Copper is the metal that is found in abundance on earth`s cluster. It is widely used in wire making and utensils making industry. However, due to its corrosive property, it is not used in machinery.
Copper is malleable and is quickly drawn into any form; hence it is famous among traders of commodity exchanges as it is used in sculpture making too.
Its prices are subjected to its exploitation, environmental and legal conditions of a country; hence it is the most volatile commodity, and therefore it is seen as an instrument of profit among traders.
Moreover, a country’s growth is also measured with the business made in the copper industry. Copper is traded in the form of CFD and as billions.
5. Natural gas –
It is an excellent alternative to crude oil. A good source of energy and its cheap rates make is the most tradable instrument after oil.
Natural gas has been gaining ground among investors due to its popularity as an alternative energy source of conventional oil, and hence it is most widely used in cars as a fuel. So it is for sure that the demand for natural gas is going to sour in the near future, and hence its market is also a growing market.
Its prices get affected mostly due to the economic policies of a country and its growth prospects.
6. Gold –
This is the oldest tradable instrument in the world. Trading in gold commodities requires patience because it is among the most stable commodities.
It is the best alternative of currency swaps also because its acceptance is worldwide.
Gold is widely used in making of jeweller, electronics chips in mobiles and communication technology; it is most commonly used in dentistry. Besides, pharma companies, scientists are researching on their medicinal aspects to cure terminal ailments.
As it is the best alternative of paper currency; hence it is the most rather one should say the top priority tradable financial and tradable instrument.
Its prices easily get affected due to demand and supply. Also, macroeconomics and political factors are significantly responsible for its price changes in the commodity exchange.
Gold is traded in the form of big gold, and it is considered a safe financial instrument in case of economic meltdown as the prices change of currency pairs impart almost nil effects on it.
7. Silver –
Due to its liquidity and its low prices, it is another most commonly tradable instrument in commodity markets. It comes next to gold in terms of precious metals. In the earlier days, in the absence of the prevalence of currencies, it was used in exchange for purchasing various products and items from the myriad range. If seen in the current perspective, there’s a vast market where common traders besides humongous jewellery houses sell and buy them in lots.
Silver is not only used in making jeweller but also it is useful in making decorative items like coins, chains, medical instruments and utensils.
Silver gets traded on a lot size of 30 kilograms. It is not just a second most precious metal that comes after gold, but it has also earned fathomable reputation and trust of people in terms of return.
Its prices are affected by inflation, demand, and production.
8. Corn –
Corn which is also known as Maize in professional botany. It is a soft commodity that is used as animal feed, ethanol, corn syrup and starch making. Many varieties of corn are available in the market like a pod, flint, popcorn, flour and sweet corn etc. corn is majorly grown in the USA. Plus, it get exported to many countries and consumed with relished with great tastes.
The corn prices are mostly dependent on demand for animal feed and biofuels; it also gets affected due to changing weather patterns and seasons.
It has a substantial portion in the US`s economy; hence its prices are also governed by any policy change in economic perspective.
Several other factors govern corn prices in the commodity markets like Ethanol markets, their demand in Chinese markets, the depreciation of US dollars and of course, the climate.
Corn is mostly sown in summers and harvested in rainy seasons. In rainy seasons the demand is relatively high, and hence the prices are also high. So, from the perspective of a trader, it is good to buy corn when it just arrives in the market and sells it at the best prices.
9. Soybeans –
Soyabeans are called as soybeans in cloacal languages of US. It is an essential soft commodity as the sowing cost of it is comparatively very low than to its selling price.
Soybean is a good source of protein; hence It is widely used around the globe. People who want to make muscles, mostly body-builder never forget to include it in their dietary supplement. Also, vegetarians who do not eat animals get the required supply or protein through soybean. This is used as a food and agricultural item. Various typed of edible items are made from soybeans like soybean meal, soyabean oil, meat and dairy alternatives like tofu and soy milk.
Making of biodiesel is very popular in the US from soybean seeds. Soybeans are mostly grown in the US, Argentina, Brazil, China and India.
Soybean is a tangible asset. Hence its prices are like other soft commodities is subjected to demand and supply. As the supplier countries are less and the requirement from the livestock’s
Is always high. Therefore, the market of soybean almost remains in a hot condition.
Its prices are affected by demand of biodiesel, soy food demand, and animal feed requirement and weather is also somewhat responsible for its costs.
As this is also a significant part of the US economy hence once the prices of dollars fall, likewise the prices of soybeans again increase and therefore, it brings an opportunity to the traders.
How to trade commodities?
It is a big question that every beginner or novice commodity trader wants to know. Futures contracts are among the most friendly and accessible ways to get into the market for transactions. It places a deal or an agreement for selling and buying a specific amount of quantity at a specific rate later in time (weeks or months). Traders use the technique to avoid risk otherwise associated with trading commodities in day trade.
Some of the biggest advantages that it offers
- Futures markets are liquid in nature. Hence, they can be encashed at the will of an investor. It is because commodities are used in daily life. These are essential items that play a pivotal role in leading life.
- Futures offer great leverage opportunities without posing perils to existing wealth.
- These markets have the power to generate amazing profits if traded carefully by putting in the right strategy.
- People have options to go long and short as it pleases them.
Some disadvantages that must be averted
- The volatility factor is a double-edged sword. It can take matters both ways if not paid proper attention while trading in any commodity.
- Leverages are good, but it demands focus and dedication from participants trading in it, else things may become consequential.
- The futures market is unpredictable too, so it can change it dices even at the time of closing positions.