Many commodities could offer an investor the potential to make significant returns on their investment. However, each market is different, so it’s essential to be careful when choosing what commodity to trade in Singaporean forex.
The three main types of commodities are industrial, soft and hard agricultural(view website for more info). Each commodity has characteristics that will appeal to different people depending on risk preferences and trading knowledge.
For example, industrial commodities may need expertise in the industrial sector but have low transaction costs, whereas agricultural products require farming practices but have high liquidity. Below are some examples of industrial and soft commodities that investors might want to consider if they were thinking about starting a position in Singapore forex.
Coffee bean futures are highly liquid and have low volatility. It makes them suitable for short term positions if you are looking to make a quick return on your investment with flexibility when it comes to exiting your position.
On the other hand, coffee tends to have high storage costs, so it is probably best suited to an investor who is confident they will hold onto their position long enough for these additional costs not to affect them too significantly. Therefore, if you’re planning on holding onto a coffee position long term, this might be the commodity for you. However, volatile price swings can happen briefly, so this is probably best reserved for experienced investors.
Cotton tends to have lower transaction costs than coffee, so it may be better suited to those looking to make shorter-term gains. It is very liquid and stable, providing the opportunity for relatively quick returns on investments. Suppose you are planning on holding onto your cotton position.
In that case, there are low storage costs associated with it, making this a good choice if you feel that the price of cotton will increase in the future due to shortages or demand increasing faster than supply can keep up with. Suppose you’re not confident that you’ll be able to hold onto your position over long periods. In that case, cotton’s high volatility might mean that the cost of doing so outweighs any potential gains.
Heating Oil (Industrial)
It’s an industrial commodity with high volatility and relatively low transaction costs, which means it may be an attractive choice for investors who want to enter Singaporean forex. While it can be traded in the short term, heating oil tends to have high storage costs, so if you plan to hold onto your position long term, this might not be ideal. This commodity also has a seasonal demand pattern, meaning its price changes over a year depending on whether people use their heating systems more often during specific periods.
So while this could provide potentially lucrative returns if you happen to get it right, choosing this at the wrong time could lead to losses instead. Therefore, this would probably not be the best choice for inexperienced traders.
Soft commodities tend to have low transaction costs and storage costs, making them an excellent option for investors looking to make short term gains or those who aren’t planning on holding their position too long.
Additionally, because these goods usually require little expertise, unlike industrial goods, there can be relatively high liquidity in soft commodity markets which means that market movements should be easier to predict, especially over the shorter term. Therefore if you’re confident you’ll be able to hold onto your position for this period, then nectarines could be a good choice in Singaporean forex markets.
Coffee is another soft commodity that might be worth considering for investors wanting to trade in Singaporean forex. While it can be traded in the short term, its high volatility makes coffee unsuitable for inexperienced traders. It also has low storage costs, making this an attractive option if you’re confident you’ll hold onto your position until prices rise again.
However, during the end of the year, when demand usually falls off, there tends to be a higher supply of coffee which means prices will fall dramatically.