Commodities
In addition to energy and metal contracts, we offer a range of soft commodity products to trade, including corn, soybeans, sugar, coffee, and wheat as CFDs.
Sounds exciting, doesn’t it? And it is, provided you’re familiar with the fundamentals of soft commodity trading. Population growth is the long-term driver of commodity prices since inevitably people will always require food, clothing, transport and electronic devices, amongst many other desires.
What are commodities?
The difference between forex trading and commodity trading is primarily the products underlying tradable security. A commodity market trades in goods such as coffee, cocoa, and mined products such as gold and oil. Forex is a global market that trades in currencies such as dollars, euros, and yen.
Overview of the market
The commodities markets are very regulated, while forex is more like the Wild West. There is some regulation with forex, but it’s not as tightly regulated. There is a fair amount of circumvention of what little regulation exists already. Some traders feel they are better off with the government on their side.
Commodities trade on an exchange, where foreign exchanges are over-the-counter and traded through brokers or in the interbank market. By trading on an exchange, commodities have daily range limits.
ORION Tradeable commodities
How the market works/is affected
There are several factors behind the high volatility experienced by the commodity market; the key factors include the supply and demand of a commodity, currency movements, geopolitical situations, government policies and economic growth.
Supply and Demand
The price of a commodity will change according to changes in supply and demand. Commodity prices rise with increasing demand. Conversely, prices will fall when there is a decrease in demand and increase in supply.
Geopolitical Situations
Some commodities are produced in regions that experience a great deal of political uncertainty.
Economic Growth
The prosperity of a country can also affect the price of a commodity. A population’s purchasing power is determined by its country’s economic prosperity. Greater purchasing power results in greater demand, which has a direct impact on the price of scarce resources like commodities.
Currency Movements
Commodities are generally priced in USD. As such, changes in the value of the USD directly impact the price of commodities. Although markets do not always operate uniformly, it is important to consider such external factors when trading.