YONKERS, WESTCHESTER COUNTY, NY — May 17, 2022 — Traders thrive in commodity markets, which keep growing popular because of their price volatility. This provides day traders with opportunities to make a profit over a short period. Commodities represent the building block of the economy, upon which other products are manufactured. By trading in commodities, traders can also diversify their portfolios.
Natural gas is one of the highly demanded commodities across the globe. This growing popularity has prompted several traders to acquaint themselves with the various ways to trade natural gas. Similarly, Soybeans are one of the most traded agricultural commodities. The United States is the leading exporter and producer of Soybeans. These two commodities represent the most active traded commodities and this article will look into these commodities. So, keep on reading.
What are the most traded commodities?
As mentioned earlier, natural gas and soybeans represent the two most highly demanded commodities among traders. This section will take a deep dive into them:
Natural gas is one of the most important sources of energy for the future. Besides its various applications across different sectors, as well as its environmental soundness, the abundance of natural gas has ensured that it will keep playing an essential role in meeting energy demand across the globe.
Why is natural gas highly demanded by day traders?
The demand for natural gas has increased reasonably with high liquidity, which makes it possible for traders to get in and out of trades with ease. Liquidity is an important factor that must not be ignored when trading commodities. In addition, being a highly volatile commodity, natural gas has become highly traded since it can expose traders to huge profits in a short period.
What factors affect the demand for natural gas?
The impact of seasonal weather on the demand for natural gas can affect the production of natural gas. This can force refineries to slow down their operation to protect their workers and facilities from the threat of adverse weather events. This could result in artificial scarcity, which can affect pricing as natural gas deliveries are delayed.
The price of natural gas increases as the economy grows. When there is good growth in businesses, as well as in commercial and industrial markets, the demand for natural gas increases. Besides this, as demand for goods and services increases, natural gas becomes wanted as a source of power.
How To Trade Natural Gas
Two of the common ways that traders invest in natural gas are discussed as follows:
Natural gas traders often take a position by using futures contracts, which involve traders agreeing to the delivery of a specific quantity of natural gas at a predetermined date at a set price in the future. In this way, futures allow traders to make a leveraged wager on the prices of commodities. To maintain their positions when prices decline, additional margins must be deposited by traders.
Contracts for difference (CFD)
With contracts for difference, you predict the price variation of natural gas without the need to assume any form of physical ownership of the underlying. A CFD can ensure that you agree to exchange the price difference from the opening of the contract to its closing.
Soybeans are another highly-traded commodity since it is relatively cheap to produce and it is rich in protein. Soybeans can be used in making a wide range of agricultural products, including meat, soybean oil, and dairy substitutes. They also help in producing biodiesel. As mentioned above, the United States is the major producer of Soybeans.
Its prices are affected by meat, animal feed, and biodiesel. Soybeans prices are also affected by other factors that can influence their availability, including weather conditions. Since the United States represents the major exporter and producer of Soybeans, the strength of the US dollar can have a significant impact on prices. As the US dollar falls, prices rise and vice versa.
A commodity is any raw materials that can be used in the production process of other goods – or simply consumed on its own. Natural gas and Soybeans represent two of the most highly-demanded commodities in the world. The high volatility of the former ensures that day traders can enjoy high profits within a short period.