First of all we will take a look at the facts:
Binaries are quite a good domain to indulge in as they give you a range of binary trading options and link up all the global markets together. Using only a single binary options platform you can go for currencies, stocks, indices and commodities as well. Throughout the course of our article however we will focus on the binary trading of commodities.
So to start off we will look at the definition of the term commodity. It is basically an item that is used to fulfill a specific need but cannot be isolated qualitatively. For example wheat is a commodity because it is produced for consumption as a food item. However it is impossible to determine the origin of the wheat just by looking at the product. Similarly Silver, Gold, Copper etc are all commodities which have fixed prices all over the globe. Commodities like Cars or mobiles phones however can easily be distinguished from one another and thus have different prices in different markets. That’s why they are not traded in binary trading.
Coffee, Tea, Wheat, Corn, Coal and Oil etc are all examples of commodities. However most of the brokers go for Oil, Silver and Gold in binary trading options as they can be traded round the clock from the start of the week to the finish. Still the hours may vary for different brokers and it might be a good idea to keep in touch with the broker’s Asset Index Section when getting involved in binary trading.
And now for the consequences:
I think now we are in a better position to analyze what makes this trade tick. As in the case of many other forms of trade and business this market also depends on Supply and Demand. We will consider a simple example for our understanding. If everyone is in need of oil (Demand is high) but there is not enough to fulfill the needs of everyone (Supply is Low), then you can expect the oil prices to go up. On the other hand the converse is also true. So, you get the basic idea of the equilibrium between demand and supply. Now we can see what factors can affect this balance. Consider for example that a unique Ferrari-like car is invented which costs less and does not consume any fuel it is understandable that the whole of the world will go for those vehicles and oil be left unattended to rot.
Note however that this was only a scenario from extraordinary circumstances and is not likely to occur but serves well for example purposes. Any sort of change can have an effect on the balance of Supply and Demand and affect the commodity price. When the balance between demand and supply is disturbed, the prices of different commodities are expected to fluctuate. Similarly, you will find a sharp difference in the prices of binary trading of the commodity when the actual price of the commodity are fluctuating. However there are times when this scenario does not hold true. This happens when the prices are fluctuating because of some speculation. I hope that this article was helpful in strengthening your understanding on the subject.