Speculative trading during the recent coronavirus pandemic has been like nothing the markets have experienced in the past several decades. Not since the late 1980s, in fact, have so many people made such large profits in short time frames. Why? The primary reason for the recent volatility is directly related to uncertainty surrounding the virus. In the early months of 2020, no one could make a guess about whether there would be a vaccine, cure, or treatment of any kind. Nor did medical experts have a clue about how long the pandemic would last.
Now that most of the world is slowly beginning to return to normal, the global economy is inching back to something like a normal state of affairs, even though there will likely be some deeply permanent effects on various market sectors. But for investors, there are some profound lessons. One is that commodities trading has the potential to deliver quite large profits for those who are willing to learn how to trade real assets as opposed to corporate shares of stock. The other lesson is that once you find a CFD trading broker, it’s possible to participate in the commodity sector with very little red tape, low margins, and simple ordering methods. CFDs, contracts for difference, represent a uniquely simple way for ordinary investors to trade just about anything, including asset-based vehicles like gold, silver, cattle, oil, and wheat.
Wild Price Action
During the COVID viral crisis, which is ongoing as of late 2020, many investors took advantage of the wild price swings in all segments of the market, including corporate stock shares, commodities like gold and oil, international currencies, and forex currency pairs. No part of the global trading marketplace was untouched by the crisis, which send industrial production and employment to lows not seen in more than 50 years. For sharp-eyed investors who refused to lose their composure, this dip in the price of virtually everything represented a unique chance to buy all sorts of securities, assets, commodities, bonds, and real estate at bargain-basement prices.
And now prices are beginning to swing in the other direction, upward in most cases, those who bought in at super-low levels are reaping the rewards. But there are still all sorts of opportunities for anyone who wants to take part because the crisis isn’t over yet. For example, the per-barrel price of oil is not yet back to its pre-COVID levels and still has quite a ways to go. The same can be said for many other commodities and corporate stock shares.
Gold as an Example
During the pandemic, the most popular precious metal, gold, reached new heights, notching well past the $2,000 mark for the first time in history as speculators and long-term investors sought out the yellow metal as both a safe haven against economic uncertainly and as a way to make fast profits on the sharp swings in value. After a pullback from those historic highs, both gold and silver continue to offer profit potential for anyone willing to speculate on further rises or drops in the value of those precious commodities.
Why are there opportunities in times of crisis? COVID might be unique in many ways but it’s certainly not the first financial or economic crisis to come along. For more than a century, attentive investors have watched prices surge and dip during uncertain times, which typically occur during wars, political turmoil, natural disasters, credit crunches, real estate gluts or scarcity, and other events that have the potential to deeply affect the international economy. But, as every watchful trading enthusiast knows, whenever prices drop precipitously or rise unexpectedly, there’s almost invariably a reaction and eventual return to the norm. No one can ever predict with absolute certainty how long it will take for stability to return, but the point is that it almost always does return. Buying during huge price dips and selling during upward spikes can be a smart path to profits.
Advantages of Contracts for Difference (CFDs)
One of the ways people can take part in any of the financial markets is via CFDs, also known as contracts for difference. These simple to use vehicles allow people of varying experience and background to buy and sell just about anything you can imagine, from stocks, bonds, and options to index funds, futures, and commodities. There are many advantages of using CFDs. They include the ability to make transactions with very low margin. That means you can leverage a very small amount of funds to control a rather large investment.