What to Consider Before Trading Base Metals

Posted: 10th January 2017 16:58

When most people think of trading metals it’s the glitz and glamour of buying and selling gold, silver and platinum that springs to mind. These offer a great way to diversify any portfolio, hedge against volatile markets and profit from precious metals. Yet there are many other base metals available which can be bought and sold on commodity exchanges around the world, including on the London Metal Exchange (LME) with Sucden Financial. Here are some important considerations to make before you begin trading base metals.

Budget Restrictions
First, consider how much starting capital you have before you begin buying and selling base metals. If you’ve got a decent amount, you may be better off trading precious metals instead. On the other hand, if your budget is more limited you will likely have to seek out the cheaper options, usually coper, lead and tin as the three most traded base metals. Though depending on when you start trading there may be cheaper options at that time.

Trade, Manufacturing and Production Levels
The same as with any commodity, there are many outside influences which determine price changes for base metals. Before buying any base metals, you should consider the current manufacturing and production levels for industries which rely on such materials. If these levels are dropping then the value of base metals could fall as well, and vice versa. Low levels of trade will also see prices remain similar, providing fewer opportunities to profit.  

Performance History
Don’t simply look at the current value of a base metal and invest in it, as it is unlikely to remain consistent. Consider the performance history of base metals before buying any, choosing those which have the most consistent prices and are less likely to experience dips. Any which are climbing or performing well should be treated with some caution, looking at upcoming events which may help them grow further, such as economic reports and politics.  

Diversified Strategy
Trading just one base metal is not the best idea, as if it suddenly drops in value then you can end up out of pocket. Keep a variety of base metals in your portfolio as each will change in value due to different conditions, as well as including a few different investments such as stocks and shares, to spread your investments across various markets.

Make these considerations before trading base metals and you will be more likely to experience success in the near and long term future.