Over the past couple of years, commodity trading has gone through significant changes, causing fluctuations in the market. With technological breakthroughs taking over every sector, commodity trading has seen several disruptions over the years. Many of those disruptions have a positive nature, both for business owners providing the opportunities and for the people jumping on the trading wagon.
In the past, only those who had deep knowledge of commodity prices and how to trade them could be successful in this domain. Resources were also limited, which is why you needed to have a hefty capital for this. Nowadays, technological advancements have changed the way we trade commodities, and this article should offer some insight into how that happened.
AI and Machine Learning for Insights
The future of commodity trading is constantly changing, and AI plays a good part in it. With AI technology, traders can now use predictive analytics to simulate scenarios from a trade before it even happens. Different algorithms are used to obtain accurate data, identifying the risks prior to engaging in a trade.
AI also looks at patterns and anomalies within a new trade, comparing them to historical behavior. This can potentially protect traders against hefty regulator fines, costly settlement errors, and other activities that could potentially lead to loss.
Reduced Storage Costs
In the past, traders who wanted to invest in commodities like gold or oil had very few opportunities for storage. This was especially the case when they wished to hold larger asset amounts.
Not only would they have to pay for or handle the storage themselves, but analyzing the big datasets would also come with significant costs, not to mention the resources used. Without a widespread global network, sharing information would prove difficult.
Technological advancements changed how commodity information is traded today. With cloud computing, traders received access to significant processing power and storage options. Now, traders can easily run complex models without sacrificing too much of their resources.
Access to Analytics Platforms
For a trade to bring profit, traders need access to science-backed intelligence to make a calculated trade. When larger trading companies are used, they often have access to different charts and research options that allow them to make a decision. On the other hand, a small-scale trader may not have had access to this kind of data.
Fast forward to today, there are plenty of analytics platforms where traders can get information on commodities in a matter of seconds. This can have several effects with the potential to be either good or bad. For instance, while access to analytics platforms makes it easier for traders to create a good strategy, it can also create many price fluctuations.
The Bottom Line
The digital revolution is constantly causing disruption in the world, which is not always bad. When it comes to the commodity trading industry, it can potentially allow traders to make larger trades without putting themselves too much at risk. Now you just need a good strategy to be successful, and technological advancements can help with that.