For a good number of traders in binary options today, trading commodity binary options is among the most lucrative and attractive trading opportunities available. This is mainly because this option presidents the traders with an array of financial assets to trade in. although there has been a lot of effort by some of the players to introduce commodity binary options to the retail traders, the efforts are yet to bear results. As a result, the retail traders are some of the least traded binary options in the industry today. This may also be attributed to the lack of confidence on the party of the traders, when it comes to trading in these binary options.
The majority of binary options traders today invest in such assets as Forex, Stocks and Indices. Such traders are the ones that view the commodity markets as markets that are difficult to profit from when trading in binary options. Despite this common notion, this is one of the assets that traders can make good profits trading in. however, the traders need to have substantial knowledge on the commodities.
The commodity trading options provided by the majority of brokers today fall into two main categories, the soft and hard commodity options. The hard commodities are the ones that tend to have a finite supply. These in most cases are the mined commodities, such as Silver, oil and gold. The soft commodities, on the other hand, are the commodities that are produced and include such things as food materials like Corn, Wheat, Cotton and Sugar.
Despite the physical differences of the commodities within these two categories, they are very similar in that they are the raw materials for the majority of products we use today. This implies that the demand for such products is bound to increase with economic growth because of the increased rate of consumption that is associated with economic growth.
It is obvious that the instability in the prices of commodities is as a result of the changes in demand and supply of the commodities. However, this aspect is not as easy as it appears; the pricing of the majority of these commodities is also influenced by the ability to meet their demand. The rate of production of commodities is an aspect that cannot be altered in a bid to meet the demand in the market. Again, a drop in the demand of any given commodity or even excessive supply of any commodity can greatly impact on its pricing.
The Risk Associated With Trading Commodities
The pricing of the various commodities on any given binary options broker is basically defined by various factors and tends to follow the demand and economic growth. With regard to the soft commodities, the rate of population growth has been known to influence the demand, hence the pricing of the commodities. Although you may need to consider the long term ability of the market to satisfy the demand and supply curve while trading in commodities, it is equally important that you also bear in mind that you also consider the short term ability of the market in this regard.
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