Learning to trade commodities can be a great way to continue with profitable investing in the financial markets despite the current high volatility in the equity markets. The fallout from last years sub prime crisis, and the so called credit crunch has battered work stock indices over recent months with large falls in value widespread.
Investors have been looking to withdraw their money from equity stock investments and opt for alternative, less volatile investment opportunities. Learning to trade commodities is one alternative that many investors are taking. One of the advantages is that the commodities markets are to a certain extent uncorrelated to equity markets.
Commodities markets have undergone a period of sustained growth in recent years thanks in part to both booming populations and economies in China and India. As these economies industrialise rapidly their demand for raw commodities such as steel, iron, etc is rapidly increasing.
Obviously there is only a finite supply of iron ore and other commodities in the ground. Combine this limited or constrained supply with a booming demand and you have the main reason for recent rises in commodities prices. Assuming you believe these economies are going to continue to grow, then learning to trade commodities may be very profitable in future.
One point worth making is that the commodities can be equally volatile as the equities markets. Unlike equity stocks, there are no balance sheets or past earnings to study when investing in a raw commodity. Instead the markets are often moved by sentiment which is very often driven off factors such as political unrest in a certain country, severe weather events like hurricanes or floods.
Learning to trade commodities is certainly not for the faint hearted then however it can provide a good alternative to the troubled equities markets.
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