Commodities Market

Companies such as City Index who provide spread betting and CFD trading services are not solely concerned with the price movements of stocks and shares, there are a many other alternatives when it comes to trading.

The best advice when it comes to spread betting is to make sure that you know your market before you get involved. As a form of leveraged trading, spread betting carries the potential for enormous gains and equally enormous losses, many times above your original stake. You should therefore ensure that you do your research thoroughly before you start, make sure that you know what affects that particularly market, and what other factors might impact on the market in which you want to trade. These could be anything ranging from social or political issues through to merger rumours surrounding two key market participants.

One of the most popular alternative options when it comes to spread betting is to trade in commodities. Commodities are actual physical assets, such as barrels of oil, or gold, silver, platinum, copper, tin – the list goes on and on. Generally speaking there commodity markets are less volatile, but given the recent global financial crisis this could easily change.

Back in July the price of a barrel of oil reached a peak of $147 dollars a barrel, just four months later the price had plummeted to under $60 a barrel. Recently the price has climbed a little bit, gaining around 7% on the back of the weak price of the dollar and a package designed by the Chinese government to stimulate their economy.

So how does this affect you? If you are considering trading on oil for example you should pay attention to the big economies in the world as they consume the most oil. If for example something happens to boost the Chinese or American economies, the price of oil is likely to go up. Another point to consider is that throughout the world the price of a barrel of oil is measured in US Dollars, therefore if the Dollar is weak it will have an impact on the price of oil, generally sending it upwards. This may have further repercussion as it could result in people moving away from the dollar to trade oil as it is perceived to be more stable.

This is, of course, a very simplistic approach to the matter of the oil price. There are thousands of other factors to consider such as supply in the middle-East, the economic and political situation in the major oil producing nations, and the state of the global economy. However this should serve to highlight just how many different events can influence the price of a commodity, just in the same way that thousands of different factors can affect a share price. Therefore if you are going to spread bet make sure that you stay abreast of developments around the world and consider how it these may affect the markets in which you plan to trade.