Commodity Trading Beginner's Guide: Which Types Are Most Worth Participating In?

In global asset allocation, commodities have long become an important investment target alongside stocks, bonds, and foreign exchange. They are highly liquid, closely linked to macroeconomic conditions, and their price fluctuations often accurately reflect economic cycle changes. For investors interested in participating in commodity trading, understanding its core characteristics and selection methods is the first step to success.

The Nature and Classification System of Commodities

Commodities refer to large-volume physical goods that enter circulation, possess commodity attributes, and are widely used in industrial production and consumption. Unlike retail products, the core feature of commodities is “large”—large supply, large demand, high circulation volume, and substantial inventories, usually positioned upstream in the industry chain.

Based on commodity attributes, commodities can be mainly divided into six categories:

Energy commodities include crude oil, gasoline, fuel oil, natural gas, and electricity. Among these, crude oil is the most important, demonstrating the best liquidity performance. The scale of crude oil supply and demand is astonishing, with downstream products permeating all aspects of life—plastics used in food packaging, PTA for clothing fabrics, PVC for building materials, and gasoline for travel. Crude oil truly deserves the title of “King of Commodities.”

Industrial metals include copper, aluminum, lead, zinc, and iron ore, which are highly correlated with manufacturing industry prosperity.

Precious metals include gold, silver, palladium, and platinum. Compared to industrial metals, precious metals are “expensive”—their prices per unit are much higher than ordinary metals, and they are almost imperishable, making them naturally suitable for storage, hedging, and liquidity realization.

Agricultural products mainly include soybeans, corn, wheat, and other widely cultivated grains, with relatively stable demand.

Soft commodities such as sugar, cotton, and coffee are often significantly affected by climate and seasonal factors.

Livestock products include pork, beef, and others, closely related to food safety and consumer demand.

Additionally, since commodities are mainly transported via sea freight, shipping indices can also be regarded as special varieties within the commodity ecosystem.

Which Commodities Are Worth Trading?

Not all commodities are suitable for ordinary investors. Choosing high-quality trading targets requires evaluation from multiple dimensions.

Market liquidity is the primary condition. The commodity must attract substantial capital participation to ensure adequate market pricing and minimize manipulation. Commonly traded varieties like crude oil, copper, gold, soybeans, and corn generally meet this requirement.

Global uniform pricing is a key feature. High-quality commodities should be listed on multiple global exchanges, facilitating participation by traders worldwide. For example, crude oil and gold maintain consistent benchmark prices across markets, allowing investors to make buy and sell decisions based on global market prices.

Storage and transportation convenience cannot be overlooked. Metals and grains are easy to store and less prone to value loss due to regional or climatic factors.

The degree of standardization must be high. Gold, crude oil, and similar varieties have consistent quality control and certification standards regardless of origin, reducing risks associated with quality differences.

Demand stability and broadness are guarantees of long-term investment value. Energy commodities (oil, natural gas) and foodstuffs (wheat, soybeans) have persistent and stable rigid demand worldwide.

Availability of fundamental data directly impacts investment success rate. When investors can easily access and analyze fundamental data, they can judge price trends from an economic logic perspective rather than relying solely on technical analysis.

Considering these dimensions, crude oil, copper, aluminum, gold, silver, soybeans, corn, sugar, cotton are currently the most valuable commodities for investment trading.

Practical Methods for Participating in Commodity Trading

Futures and Options: Core Approaches in Derivative Investment

The main ways to trade commodities are through physical investment and derivatives. Among these, derivatives—especially futures and options—are more feasible for individual investors.

Each commodity futures contract has a clear underlying asset, for example, crude oil futures correspond to the spot price of crude oil. Investors first need to determine the type of contract to trade and then judge the expiration month of that contract. Futures pricing is based on expectations of the spot price at a future month, so investors need to predict the price trend of the commodity’s spot market for that month before making trading decisions.

Fundamental Analysis: Understanding the Fundamental Drivers of Prices

The core factors influencing commodity prices mainly come from three aspects: macroeconomic conditions, supply levels, and market demand. Research on these factors is called fundamental analysis, which determines the direction and magnitude of price movements.

For example, after the outbreak of the COVID-19 pandemic in 2020, global central banks implemented quantitative easing (QE), leading to excess liquidity and inflationary pressures (“more money than goods”). Subsequently, commodities experienced a significant rally. This fully demonstrates how powerful the driving force of commodities can be when the global economic cycle is synchronized.

Technical Analysis: Optimizing Entry and Exit Timing

In addition to fundamental analysis, investors should also use technical tools for analysis. However, fundamental and technical analyses are mutually reinforcing—fundamentals need technical confirmation to more accurately grasp entry and exit points and control risks; technical analysis requires fundamental guidance because pure technical analysis cannot determine whether a trend can continue or how large the price swings might be.

Combining both approaches is the correct way to approach commodity trading.

The Best Timing for Investing in Commodities

The ideal window for participating in commodity trading often appears when major global economies’ cycles resonate. During such times, central bank policies, corporate investment cycles, and consumption demand cycles are highly synchronized, exerting the strongest influence on commodities. Although such opportunities are infrequent, when they do occur, they often present significant trading chances.

Summary

Commodity trading represents a process of re-pricing the global industrial chain and is an asset allocation tool as important as stocks and bonds. Whether you are a novice or an advanced investor, mastering the coordinated use of fundamental and technical analysis, and selecting high-liquidity, globally priced, fundamentally driven quality varieties—such as crude oil, copper, aluminum, gold, silver, soybeans, corn, sugar, and cotton—are essential steps toward a steady and successful commodity trading journey.