Recently, more and more people are paying attention to commodity trading, especially those who are very interested in the question "What is commodity?" Actually, commodity trading (Commodity) is not as complicated as everyone thinks. Today, I will talk about my understanding of this market.

In simple terms, a commodity is a basic raw material, like gold, crude oil, natural gas, coffee, sugar, and so on. These goods can be divided into two main categories: one is agricultural products (such as coffee beans, sugar), and the other is extracted from the ground (such as oil, metals). Interestingly, the volatility of agricultural products is usually higher because they are affected by weather, while energy and metals tend to be more stable.

Why trade commodities? I think there are mainly two reasons. First, it can help you hedge against inflation—when prices rise, the prices of these goods often go up as well. Second, it can diversify risk because commodity prices usually do not move in the same direction as stocks and bonds, so adding them to your portfolio can reduce overall volatility.

However, it’s important to note that commodity trading carries higher risks. The volatility can be twice that of stocks or four times that of bonds, so if you trade with leverage, you need to be especially careful. I’ve seen many people lose everything quickly due to high leverage.

Regarding trading methods, there are several options for beginners. You can buy commodity ETFs, which means you don’t need to hold physical goods and don’t have to worry about storage. There are also futures, which require some knowledge but have lower costs. Or you can buy stocks of related companies, such as mining companies or oil companies. The most flexible is CFD trading because you can go long or short, use leverage, and trade 24 hours a day, five days a week.

There are three main costs to watch out for: Bid-Ask Spread, Swap (overnight fee), and Commission. These costs directly affect your final profit, so you must calculate them carefully. Some platforms have wide spreads, others have narrow spreads; choosing the right platform can save you a lot of money.

Trading hours are also important. Gold and silver, for example, are traded roughly from 6 a.m. to 5 p.m. Thailand time; crude oil from 6 a.m. to 5 p.m.; coffee and sugar from 3:30 p.m. to early the next morning around 1 a.m. Different commodities have different trading hours, so plan according to your time zone.

Honestly, commodities should not be the main part of your investment portfolio because of their high volatility. They should only make up a small portion, used for risk hedging. Also, before entering the market, you must fully understand the factors that influence prices—such as supply and demand, weather, geopolitical issues, and so on.

If you are a beginner, it’s recommended to practice with a demo account first, familiarize yourself with the trading process and platform operation, and then trade with real money. This way, the risk is much lower, and you can make more rational decisions.