Commodities trading used to be a niche activity undertaken primarily by professionals due to the high entry barriers of time, finances, and knowledge. Now more than ever, traders have a variety of entry points into the commodity markets from which to choose. Metal, live stock, energy and agricultural commodities are the four main types of traded commodities. Commodities offer an alternative to traditional securities that can help diversify investor portfolios. Commodities are generally considered to be high-risk investments even though their market is affected by factors that are hard to predict, such as weather extremes, disease outbreaks, and natural and man-made disasters.
Investing in commodities can be done in a variety of ways, including through futures contracts, exchange-traded funds and options trading. The term commodities stock exchange” can refer to both the physical location where commodities are traded and the legal entities that have been established to regulate the trading of standardized commodity contracts. In recent decades, several commodity exchanges have decided to merge or gone out of business. A wide variety of commodities can be found at most exchanges, though some do focus on only a few. The Chicago Mercantile Exchange (CME) is a major U.S. market.
