It’s hard to find anyone who will say that commodity prices are headed downward. In a rare case of almost universal agreement among traders, investors, and institutions, commodities are on an upward trajectory. The only disagreement is why this is so and how long the surge will last. With several of the energy-related assets, like elements used in electric cars and for non-fossil fuel energy, the price run-up could last decades. There’s even a strong case to be made for some of the stalwarts of the segment like gold, platinum, nickel, and foodstuffs. Petroleum is a special case because while it’s not a part of the new energy paradigm, it’s already in short supply and experiencing historic price levels amid the Ukraine-Russia war and a global supply crisis.
How should investors and traders use the current deluge of information about commodities to make educated guesses about near-term and long-term values and transactions? The first step is to review the list of the highest-flying assets in the new energy field. Next, figure out how to use smart money management to place trades that balance risks and potential returns. Understand the unique risks that come with trading in this volatile sector, and be especially careful to avoid falling prey to the most common myths that pervade discussions of commodities trading. To begin, explore the fast-paced action taking place in assets like copper, nickel, and cobalt.
Some Supplies Are Extremely Tight
Whether you’re trying to put together a strategy for a long-term portfolio of US stocks or figuring out how to trade commodities in Canada, Europe, Asia, or anywhere else, there are a few undeniable facts that can’t be ignored. One is that several of the next generation substances for a non-fossil fuel economy are steadily rising in price. It’s deceptive to isolate petroleum and assume that the old carbon economy is here to stay. It isn’t, and the recent surge in petrol prices is not due to investors backing off their commitments to go green. The war in Eastern Europe and a global logistics crisis are just two of the extraordinary factors that have propelled oil to record levels. But the big picture is that higher costs for nickel, aluminum, and other assets, which are currently going up, could experience a sustained increase for as long as 30 years.
How Traders Can Benefit
Trading and investing enthusiasts are fortunate in that they can get involved in this quick moving niche easily. Of course, it’s always possible to purchase ETFs (exchange traded funds) on particular metals or other assets. However, for individuals who want to diversify their holdings, speculate on prices, and aren’t intent on owning underlying assets, CFDs (contracts for difference) can be an ideal way to play the markets. It’s essential to determine whether you want to build a short-term or long-term portfolio. Many trading devotees prefer to get in and out of positions within one or two days, which means keeping an eye on the fastest moving assets and playing the intra-day value swings. The good news for individuals who prefer to follow the energy asset markets and non-precious metals is that there are plenty of opportunities in 2022.
As the Ukraine war ambles on, the COVID pandemic refuses to end, inflation hits most of the developed nations, and supply chain challenges get worse by the day; there are dozens of ways to get involved in the market action.
Don’t Overlook Risks
Never ignore or overlook the potential risks of adding assets like petroleum, cobalt, nickel, copper, or aluminum to your portfolio. Many who take part in this segment of the economy use careful stop placement and precise money management on every trade. Even though a commodity chart appears to be rising in the long run, there can be daily high-low swings of considerable range. That means setting stops far enough below your entry point so that they don’t get blown out on the first pullback.
Avoid Falling for Commodities Myths
“What if I have to take delivery?” That question always pops up during discussions about commodity trading. Individuals who settle their accounts before expiration never have to take physical delivery of anything. For CFD traders, the danger is non-existent because the investor does not own the underlying asset. Another common myth is that only wealthy people can take part in a commodity exchange. That might have been partially true 50 years ago, but today anyone can take part, even investors with minimal capital in their accounts. Even in the case of the most popular precious metal, gold, there’s no need for individuals to be well-heeled to speculate on ups and downs in the per-ounce price.
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