The Top Ways to Invest in Commodities

As this guide has rather exhaustively demonstrated, commodities are as complex as the people who trade in them. Because of this, the top ways to invest in commodities are as follows:

1. Pick a commodity or commodities that are interesting.
No successful commodity trader gets there purely because of his understanding of abstract mathematical formulas. Commodities are impacted by real life events. Even the steadiest commodities will experience fluctuations. The only way to have some notion of what is around the bend is to be a full participant in the process. By choosing a commodity that is interesting, a trader or investor will be able to stay motivated to keep track of developments that are affecting that particular commodity.

2. Register with a licensed and affiliated broker.
No matter how well informed any trader is, no one will be able to interact meaningfully unless that trader is registered with a licensed broker. Each exchange house requires that all traders are members, or are affiliated with members of the Commodity Futures Trading Commission.

3. Be prepared to lose initial investments.
For those who are attempting to trade and invest in commodities for the first time, being prepared to lose money while learning how quickly the market can change and shift will save potential heartbreak and help individual investors avoid a personal financial crisis. Using trailing stop losses can help lock in gains and protect investors from some of the downside risks. It is far more important to be profitable than it is to be right all the time.

4. After experience has been gained, invest in indexes.
After an individual investor or trader has learned the ropes of commodities trading, investing in larger financial institutions, such as indexes, can yield surprisingly profitable results. However, this should only be attempted after significant experience has been gained by the individual investor.

Important Market Indicators

Commodity bull and bear cycles usually occur over long periods of time. However, some key commodities can frequently provide clues as to what may lie ahead in terms of the direction of the market. The price of gold and silver is usually taken to be an indicator of the overall health of the commodities market. Additionally, oil prices have a heavy impact on how the commodities market is perceived.

If any of these main commodities suddenly experiences a price hike or price drop, investors and traders should take note that the market is probably going to experience a fairly significant change. Because these are tied into industry and general economic perceptions of fiscal reality, they are considered to be extremely important market indicators.

Additional Recommended Resources

Each year, innumerable books, blogs, and magazine articles are devoted to the intricacies of trading in the futures market. The internet has played a particularly vital role in the development of the commodities market, and continues to generate enormous amounts of constantly updated information on potential futures positions.

Individuals who wish to seek out additional information and resources about commodities trading are encouraged to explore the resources offered by the Commodity Futures Trading Commission, which regularly publishes texts detailing their studies of trends in energy stocks. Websites such as Bloomberg.com frequently have intelligent, highly informed web articles that can help investors seek out the information they need to make crucial decisions.

Several major exchanges maintain websites that provide up to the minute information on trades and other financial transactions. Keeping up on changing regulations in terms of how trades are managed is also vital to any investor or trader. These websites post their new rules as they change.

The best resources are frequently the people who have experienced the market first hand. By contacting brokerage firms either through the phone or via an online software platform, an interested individual can schedule an interview with a learned broker to truly understand how this incredibly complex and versatile system works. The key to any informational quest is to enjoy the experience of discovery and be unafraid to ask questions. Most people, when asked an intelligent and informed question, will be happy to give an interesting and fully rounded answer.