Commodity Trading in Australia 

 November 9, 2022

Commodity traders buy or sell futures contracts for their account or on behalf of clients, who receive a share of any profits from those trades. In Australia, trading platforms like mt4 Australia are seeing an influx of new traders. However, few traders invest in the long term. Worry not because this guide covers trading strategies that every beginner should know.

Australian Commodities

Commodity trading strategies in Australia vary greatly. As a major producer of commodities, including coal, gold and iron ore, Australia is a perfect place for traders to be involved in the industry. Commodity trading strategies differ based on what type of commodity they trade. Some traders use futures contracts, while others prefer spot contracts. For example, some speculators look at short-term gains, while others are long-term investors who don’t mind holding their assets over time.

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Some traders use technical analysis, while others rely on fundamental analysis when making trade and investing decisions.

Division of Commodities

The Australian system divides commodities into energy, metals, and agriculture. This classification differs from the United States system but is similar to the European system.

The Australian energy sector includes crude oil, natural gas, coal and non-ferrous metals (which include aluminium). On the other hand, the minerals category includes iron ore and copper ore. Finally, you have agricultural products like wheat and corn.

Futures Contracts

Futures contracts are legally binding agreements to buy or sell a commodity at a specific price on or before a given date. They are traded on the stock market like shares in companies or business trusts.

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In Australia, futures contracts are traded in units of 100 tonnes – this is referred to as “Tons”, with each contract worth 10 Tons (or 10,000 kilograms).

Platforms like mt4 Australia display all commodity-related information efficiently, making it easy for traders to understand their investment requirements.

Speculator Strategies

Speculators make money from market fluctuations by buying and selling futures contracts. They do not hold their positions for long periods, instead attempting to capitalise on short-term price changes. Speculators don’t necessarily want to own the commodity or product that they’re trading, but would rather make a profit from buying and selling the futures contract itself.

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Some commodity traders speculate on market fluctuations, but most remain in their position for at least several months.

Producers and consumers of commodities also use the futures market to hedge against price fluctuations. A producer who expects the price of their product to fall can sell a futures contract, locking in a future sale at an agreed-upon price. If the price ends up higher than expected, the producer still receives the predetermined amount from their sale; if it’s lower than anticipated, they don’t have to sell at that low rate.

Examination of Global Market Trends

Many factors influence the global market trends of a commodity, and smart investment decisions usually stem from a close examination of these trends that include:

  • Global demand for that particular commodity. The price will go up if there’s high demand for a commodity. For example, if you’re in China and you want to buy oil, it will cost more than it would in Australia because there are so many people who need oil and don’t have enough supply.
  • Global production of that particular commodity. If there is a lot of supply coming from one country but little coming from another country (for example, if Russia is producing lots of wheat but Canada isn’t), then the global price of wheat could rise because there’s more on offer than usual at any given time worldwide.
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