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Futures and Commodity Trading; Learn the Differences

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Meir Levy
Futures and Commodity Trading; Learn the Differences

Futures and commodity trading can be very complicated and volatile assets. Both trading options are significantly different from investing in stocks and bonds. Therefore investors need to research more before investing in futures trading. In fact, investors can expect high value and greater success with the help of reliable commodity brokers. 


This blog intends to highlight the potential difference between futures trading and commodity trading and how investors can make the most of their investments.


What Is Future Trading?

Futures trading is buying and selling particular types of derivatives contracts. The contracts entitle one to buy and sell particular assets like stock and commodities at a particular price at a certain date in the future. To be more precise a futures contract is a financial instrument that enables buyers and sellers to transact an asset at a fixed price at a future date.


• Investors can trade futures to speculate on the price direction of security and commodity. 

• The key future market includes stock indexes, energy, currencies, grains, livestock, and forestry. 

• The most evident advantage of future trading includes access to leverage and hedging. 

• Your future trading plan must include entry and exit strategies and definitely a risk management rule. 


However, in the entire process, it is very important to choose a quality future trading platform that will either make or break your trading opportunities. 



What Is Commodity Trading?

Commodity trading refers to investing in fungible products in financial markets. It can be any commodity good of various and the same type. A commodity is any type of raw material or primary agricultural product that can be bought and sold – wheat, crude oil, gold, and many others. Commodities are usually traded using futures contracts that allow purchasing a set of amounts at a particular price. 


• Unlike the stock market, there is no restriction on short selling. In addition, there is potential for both profit and risk. 

• If the investors get well equipped with the changing marketing cycle, which includes the demand and supply chain of the products they can be easily successful in the investments. 


Is Commodity Trading The Same As Futures Trading?

No, they are related. Futures are financial derivatives you agree to buy and sell at a certain price in the future. On the other hand, commodities are fungible goods like oil, iron, and wheat. Commodities are usually traded with futures. The commodity market is volatile; hence, it is very important to understand the economic cycle. 


Bottom Line

Investing in commodity and futures trading has a lot of benefits. Therefore, as a beginner, you should hire an experienced and reliable broker to know the market in a better sense and consolidate your trading career.

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