Why Is Commodity Trading Difficult For The New Traders?
You may have heard that trading with commodities like oil and gold is very profitable. They offer high volatility and the traders can make much money in a small amount of time. You have not heard it wrong but there’s a catch. The risks involved in trading with these commodities are higher than any other currency pairs. They can make you rich in one moment but also can take away all your capital. This article will tell you how why this attractive trading is difficult for the traders. When the basic of making money is buying and selling of currency pairs, this simple trading can become risky for your account.
The fundamental factors
Ignoring the fundamental factors is very common among the new traders. Many people in the United Kingdom often says trading is not all suitable for the full-time profession. To be honest they don’t really core concept of Forex trading profession. If you educate yourself properly and learn about the fundamental factors, leading your life based on this profession will be very easy. Never think technical data is enough to secure your profit factors. Technical data will give you the exact entry point for your trade. But in order to ride the long-term market trend, you must know the proper way to analyze the news data.
Since the majority of the new UK traders don’t understand fundamental factors, it becomes very hard for them to assess the commodity market. The price of a commodity is very sensitive to a news release. Major news releases can create a high level of market volatility which can even change the course of an established trend. So, without having enough experience in the options trading industry, you should not try to trade the commodity market. Start trading with the currency pairs and slowly learn about the nature of the commodity market.
The prices are very volatile
This is the first reason people like to avoid trading with the gold and oil. Volatility is expected in Forex but they become too much, it is not possible for the traders to handle. As a result, they look for other markets where they can trade with low volatility with currency pairs. The prices of oil are not stable. Though there are many international organizations trying to control the price and keep it within a limit, it does not work in that way. The Middle Eastern countries can increase the price as their wish and they do not have to give explanations. As a result, the predictability of the commodity prices is wrong. Traders who trade with commodity knows the risks but they are highly experienced. If you can afford to take the risks, you can trade but always keep in mind the volatility. They are unpredictable, they do not appear on the chart and they can take away your money. High volatility is risky for your investment. If the prices did not move like that, many traders would have come to this trading but as the price is not favorable, it is better to stay away from trading with oil and gold.
There is the release of news and information
The commodity industry has released news and information every hour. It makes the industry more volatile and also unpredictable for the traders, keeping them away from successfully using their strategy. When you think the price will stay stable, the organization gives some news and it the price changes. This goes on and on and there is no change. The information changes the trends and also the direction, placing your investment at risk.
Not much information is available
If you run into any problems, the traders cannot give you advice because information is not available for the traders. It is traded by a group of people and they are likely not to help you with your trades. Help is needed for progress in your career and in commodity, it is hard to do that.
This is a guest contribution by Charles Dearing.