Trading in energy commodities can be a lucrative option for businesses and individuals looking to diversify their portfolios. Not only do these commodities offer high capital growth potential, but they are also essential to running the economy.
It is essential to understand the different types of energy commodities available before attempting to trade them. Commodities based on oil, such as gasoline and heating oil, tend to be the most popular energy commodities traded today because they are used in everyday life. Other kinds of energy commodities, including coal and natural gas, are traded, but not nearly as much as oil-based ones.
Top Tips for trading in energy commodities
Some pro-advice on how to get started with trading energy commodities:
Calculate whether it’s right for you
Your investment goals must match the risks of the market. Many people underestimate just how volatile these markets can be, so decide if this level of volatility is right for you; also, consider your knowledge about these markets and figure out what opportunities exist within them before simply throwing money in.
Do your research
The best way to make money in any market is by getting information first-hand. You can get information from financial reports, company announcements, market updates, etc.; the more time you spend researching, the better.
Narrow down your choice
Once you have determined your investment goal and have done your research on the energy commodity market(s), narrow down the list until you are left with three to five potential commodities.
Choose a few brokers
Shop around for a reputable broker that offers low commissions and excellent customer service. While lower commissions may seem attractive at first, they might end up eating into some of your profit if you do not invest enough. Personal recommendations are one of the best ways to find reliable brokers.
Trading energy commodities can be a volatile business, so wait for signs of price recovery before offloading your stocks. If the commodity prices drop further after purchasing it, consider holding onto them until they are worth enough to sell at a profit or use your investment strategy to lower the losses.
Patience is also essential when it comes to buying these commodities; if you rush into investing without doing enough research, you might not end up making any money at all.
How to trade energy commodities in Singapore
Before trying to trade anything, the first thing you will need is a bank account that allows you to deposit, transfer, or withdraw money online. This is the only way you can get money into your trading account without having to walk into a bank branch physically. If you have an income/salary account, this should be good enough for most commodities brokers. It also pays dividends to have an FX Forward Trading Account, allowing traders access to better exchange rates than retail accounts. They are less hassle as they are not geographically specific.
Once you have an account set up with a brokerage firm, it will be time to open a trading account to deposit the funds from your bank account. Each broker has different requirements for opening accounts, and it pays dividends to read through these before deciding on which broker you want to go with. Some brokers may only accept traders who have been referred by existing clients, while others may require that you have some kind of minimum deposit amount before being allowed to begin trading. It also helps if the broker is regulated by international regulators like ASIC/FCA, as they are under constant scrutiny for their operating practices. This is the best way for you today to trade energy commodities in Singapore.
Commodities trading has become a desirable, lucrative and growing market worldwide. It is exciting to daytrade for investors seeking high yield returns on short term investments. For those interested in trading commodities, it is recommended to use a reputable online broker like Saxo Bank, which offer low commissions and excellent customer service. To learn more, view page here.