Commodity trading has excellent potential for huge profits in the shortest possible time. Because of this huge profit potential, it is preferred trading option. Commodity trading has also proved better investment option compared to savings in a bank account, stocks, bonds and real estate.
Commodity trading investment for beginners may prove highly profitable or disastrous to you depending upon your decisions. Suppose you have a futures trading account. You may have 10,000 dollars in your account. This may allow you to trade single S&P 500 features contract.
You may need 30 or 40 times higher money if you are to invest money in the share trade for equivalent amount of share trade. Just understand that buying an S&P feature contract is same as investing money to buy individual stocks.
Lets try to see how trading works. Suppose you think market will be going up in the near future. On the 1st day of June you make your move and happen to hold your position till two weeks. After 2 weeks your stock position would have doubled in its worth. That is excellent for two weeks. Profit will be same even if you take the futures route. This example just shows the great earning potential of commodity trading. Be careful same stands true for loses. If you do not exit at the right time, your loss curve will be equally steep.
Commissions in this type of trading are relatively very small compared to other form of trading. You will be able to appreciate the difference from following example. In case of futures trading you will pay commission of 30 to 50 dollars, whereas commissions for buying and selling of equivalent individual stocks at 1% would have resulted in 7,000 dollars.
Speculations in commodity trade have advantage over those in other investment fields like real estate. In case you have balance in your account and you have maintained sufficient margin, you can use your profit for trading purpose. In the other investment avenues it is not possible to use profit unless you sell your investment.
Moreover commodity trading is surprising easy compared to other form of trading. In case of stock market you have to choose out of thousands of available stocks, but in this case you have an option of around 50 futures markets.
It is also easy to short sell or long trade, with little caution one can make money in any scenario, whether market moves up or go down. Diverse nature of the futures portfolio also provides buffer from any potential economic chaos.
To top it all you will find tax advantages when you make profit from futures trading. Your holding period is not important for commodity profit; they will be taxed sixty percent for long-term capital gains. For short-term capital gains deduction will forty percent.
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