The introduction of online commodity trading platforms means the platform is readily available to private investors. They can access global markets with a modest amount of funds. Undoubtedly, the commodities market is an emerging one and has huge potential to earn big profits. Commodity trading companies help new investors on commodity trading platforms by utilizing multiple methods to fund their financing activities. Different commodity trading firms employ various funding strategies that involve different ratios of debt maturities and debt types. Just as there are several strategies to cook one vegetable in a variety of ways, there is an unlimited number of commodity option trading methods available in the commodities market. Any strategy you follow should be based on your appetite for risk or risk aversion and your personality. To put it simply, if you don’t have a high acceptance for pain, look for easiness, and aren’t an aggressive person (personality wise) then you should not be using a commodity futures trading strategy involving high risks. If you still follow this strategy, the result will be an unexpected and ill-timed liquidation of trades, furthermore, other illogical emotional decisions may be taken as a result.

1- The very first factor is to read and understand the parts that compose that index. For instance, take Equities. Does an index composed of equities belong to different market sectors or just one? Understanding this and finding the answer helps to focus on a specific sector and its updates or news releases that can influence the value of that index.

2- The second factor is to carefully analyse the correlation between indices and currencies. A domestic index or indices are usually with a country’s currency and its conditions. For instance, when the demand for US dollars increases, the value of US indices also rises. The main cause for this lies in foreign investment. Why? Investors need to purchase dollars first when they are investing in US stocks. This influences the American indices to increase in value.

3- Third, observe the presence of any possible link between the commodities market and the country’s domestic index. For instance, you can observe this correlation for Oil exporting and importing firms and their respective indices. A country importing oil will have a likely drop in its index on low crude prices. On the other hand, the index of an oil exporter country is likely to rise.

4- Lastly, keep a regular check on any changes in index listings. The shares that constitute any index can witness change due to mergers and acquisitions or market capitalization. For instance, the company “X” is regarded as a valuable company that has the biggest capitalization like other big firms. Market capitalization for a firm can be explained by how the market assesses the total worth of its “issued” shares. The individual stock price of firms can impact an Index.

So, if there is a decline in the market capitalization of company “X”, its shares can be replaced with another firm with a bigger market capitalization as “X” shares are now very small to be quoted on the index.