Why the commodity trading rush is heating up in 2023
By Paul Reid
20 October 2023
Many Exness traders have become more interested in commodity trading in recent months, specifically precious metals and oil. This is likely due to international conflict and rising recessionary fears, but it might also be a result of major currencies being stuck in a narrow range.
Supply and demand is perhaps the most influential factor in commodity pricing, and the ebs and flows, rallies and crashes come along like seasons. Commodity market trends are typically long and deep, which gives traders more chance to catch a trend, even if they didn’t get in on the action early. Let’s explore commodity trading and see if it’s right for you.
Both stocks and currencies are defying many of the traditional forecasting techniques right now, and digital currencies are snoozing with no fundamental indications of a change on the horizon. Keeping up with economic influences can be a full-time job. Researching commodities only can reduce that time significantly.
While daily price movements can be volatile, the overarching direction is usually more stable, adhering to the mantra ‘The trend is your friend’. This tendency towards sustained bull or bear trends means there are many attractive entry points between price reversals.
Commodity trading ranges
Commodity futures trading is known for its huge range fluctuations. Those high-to-low differences make commodities both a risky proposition and an attractive opportunity. Catching a trend at the beginning of the formation and exiting at the reversal can result in massive differences, which are then multiplied by your investment size and leverage.
Gold is famous for such behavior, which is probably why XAUUSD is the most traded futures contract in Exness, but gold is not the only commodity available. Here are 13 trading assets that offer interesting price ranges.
UKOIL - Crude Oil Brent
USOIL - Crude Oil (WTI)
XNGUSD - Natural Gas vs US Dollar
XAGAUD - Silver vs Australian Dollar
XAGEUR - Silver vs Euro
XAGGBP - Silver vs Great Britain Pound
XAGUSD - Silver vs US Dollar
XPDUSD - Palladium vs US Dollar
XPTUSD - Platinum vs US Dollar
XAUAUD - Gold vs Australian Dollar
XAUEUR - Gold vs Euro
XAUGBP - Gold vs Great Britain Pound
XAUUSD - Gold vs US Dollar
From the list, 4 commodities stand out, and one of them is about to see a massive price move.
Oil is heavily influenced by supply and demand. OPEC and other major producers have the ability to play with prices whenever they want, and they do. By simply cutting production, they can create a false deficit or shortage in the market, which drives prices up. Watch out for such announcements, but beware. There is a lag between the announcements and the market price reaction. After the announcement is made, check the price on the oil charts daily. Buy low sell high is the mission of every trader.
Platinum is the second commodity worth mentioning. As the electric vehicle industry continues to increase production, the demand for platinum is absorbing the supply, and that typically leads to significant price increases. Watch out for platinum scarcity in the near future.
Now for XNG. Natural gas is said to be a seasonal commodity. During the hot months, natural gas demand is much lower, but as the winter months approach and temperatures fall, demand goes up as homes and offices turn on the heating.
Gas prices have been holding in a low range throughout the summer, but the prices are already starting to rise. Compared to spring’s $2,200 - $2,300 range, XNG’s passing of the $3,000 mark is significant, but It has a long way to go to reach last November’s $7,300+.
And then there is gold. With massive price swings, XAUUSD is the most attractive and feared trading asset. Huge price shifts can generate incredible profits, but also wipe out trading accounts in a single day. Very risky business.
Fortunately, there are two options available to Exness traders that help reduce risks without limiting profit. The first is Stop Loss. For a buy order, a Stop Loss can be placed below the purchase price, so if the market goes opposite to the traders forecast, the Stop Loss can activate at a level set by the traders. This limit doesn’t activate if the price goes in the forecasted direction.
The second is unique to Exness. Named Stop Out Protection, this feature is for traders with a greater risk appetite who don’t wish to limit the rollercoaster range of the asset being traded. This feature reduces stopouts by up to 30%.
Gold is still low in the price range, but it’s already rising, and with these currently uncertain times, it is impossible to predict where XAUUSD will go by the end of the year.
Both precious metals and energies are highly susceptible to supply and demand dynamics. The long sweeping bull and bear trends in the metals markets offer remarkable potential for well-timed trades, and the narrow, rhythmic price actions of oil also keep trading exciting and fast-paced. In fact, at the time of writing, commodities are the leading asset class in Exness.
The popularity of gold and other commodities might also be due to the competitive conditions that Exness offers. Exness is known for having very low trading costs and competitive buy/sell spreads. Lower costs translate to higher profits and reduced losses.
If you are thinking about trading commodities, then the Exness trading software/trading platform offers safe, reliable, and efficient access to commodity trading. Getting secure access to the world markets can be done in minutes, and both deposits and withdrawals are rapid and commission-free.
Once you’ve got an active trading account, just remember to be patient and choose your entry points wisely. Buy low, sell high, and don’t let greed or emotions dictate your trading strategy.
This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.
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