What skills do you need for commodity trading?

Posting date: 28 March 2024

Commodities trading is a fast-paced industry, impacted by global events and trends. Commodities traders understand global markets and enjoy a career path that is ever-changing, offers ample opportunity for professional development, and in which no two days are ever the same. 

This exciting sector involves the buying and selling of commodities in either national, or more commonly international, marketplaces and commodity trading skills lend themselves to the dynamic nature of this ever-evolving industry.

The core commodity trading skills 

Like with any industry, there are key skills that those building a career in commodity trading should focus on developing. Some of these are soft skills, while others are more industry-specific.

Some of the principal skills that successful commodity traders master include:

  • Strong analytical skills

  • An understanding of risk management strategies 

  • Critical thinking skills

  • An understanding of how trends and events can influence global markets

  • Detail-oriented mindset

What are the basics of commodity trading?

Due to the wide variety of commodities that are traded, those who work in commodities trading enjoy a sea of opportunities to flex their skills and diversify across dynamic markets. In general, traded commodities are divided into four core categories:

  • Metals - These commodities are sometimes seen as more reliable than others, so some investors may choose to invest in these during periods of volatility. 

  • Energy - These markets are particularly influenced by changes in energy consumption and sustainable technology advancements and adoptions. Strong analytical and critical thinking skills can help energy traders to make successful trades.

  • Livestock and meat - Investing in these markets can be risky due to market volatility, however, there has been speculation that rising populations will keep demand for meat high.

  • Agriculture - While products in the agricultural sector often experience high levels of demand, they can be impacted by external factors such as regional conflict, trade issues, or unpredictable weather patterns. Understanding risk management strategies can be vital to excel in agricultural based commodities trading. 

Futures Trading 

Another section of commodity trading is trading futures contracts. Put simply, this is when traders bet on the value that a commodity will have in the future. For example, if as a trader you think that the price of a commodity will rise, then you will buy more future contracts. If you think that the price will fall, then it makes sense for you to sell your futures contracts. 

An understanding of how global markets work and strong critical skills are essentials for buying and selling futures contracts. 

What does it take to be a commodity trader?

Finding success in commodities trading involves understanding the principles of supply and demand. As commodities are physical items, like ore or grain, demand increases the value of a commodity increases. Alternatively, if supply increases but demand decreases then the market becomes flooded and the value of a commodity decreases. 

Commodity traders need to have an understanding of how global events can influence markets as the interconnected nature of industries can lead the prices of commodities to rise or fall. Conflict in Ukraine, for example, directly contributed to increased oil prices. Meanwhile, a particularly dry summer in the Mediterranean reduced the olive oil production of the region, which, in turn, limited supply and increased the price of that commodity.  

Understanding the basic foundations of supply and demand and how these can be impacted by world events, trends, and markets can help commodity traders take more informed risks and foster greater financial success. 

Is it hard to become a commodity trader?

The dynamic and fast-paced nature of the industry means that it requires traders to stay well-versed on developing world and market-specific events and trends, so it's great for those who like to keep their fingers on the pulse when it comes to keeping up with the news of the world. 

For those who work to develop their commodity trading skills, it can be a highly rewarding and lucrative career. 

Some traders invest in higher education in relevant fields, such as data analysis, international finance, or data intelligence. Others simply grow their real-world experience by starting to make small trades through relevant trading platforms. While it requires the active development of certain skills, a commodity trader career path can be a viable and fulfilling option for people from a wide variety of backgrounds. 

Swisslinx and commodities trading in Switzerland, Europe and beyond

With expertise in matching skilled professionals with cutting-edge companies, the talented Swisslinx team are well-versed in recruiting for the commodities trading sector. From developing careers in commodities trading in Zug to commodities trading in Geneva, Swisslinx has a range of exciting opportunities in commodities across Switzerland, Europe and the globe.

 If you are a passionate professional looking for the next step on your commodities trading career path, then Swisslinx is the place to start.