Online Commodity Trading  Hot Commodities and ETF Alternatives

Furthermore, online commodity trading is popular for its low margin requirements, which allow traders to control several thousand dollars worth of commodities for just a few hundred dollars.

And finally, it's important to note that gold and crude oil are commodities as well - and their surging prices over the course of the past year have also been a factor in the increased popularity of online commodity trading.

Online Commodity Trading Hot Pick - Gold

Gold has been one of the hottest online commodity trading picks for 2006, nearly doubling in price in the last two years. In fact, since 2001 gold has nearly tripled in value.

Gold is traded in 100 ounce contracts on the Chicago Mercantile Exchange (CME), 33.2 ounce contracts on the Mid-America Commodity Exchange (MCE), and 32.15 ounce contracts with the Chicago Board of Trade (CBT). Most online commodity trading brokers, such as XpressTrade, use the CME to facilitate their trades.

An alternative to online commodity trading for investors interested in gold is the exchange traded fund (ETF), streetTRACKS Gold Shares (ticker GLD). Finding a broker for online commodity trading isn't as easy as opening a stock trading account, and GLD allows you to trade gold in the form of a stock. Each share of GLD approximates 0.10 ounces of gold, so if gold is $600 per ounce, a share of GLD would trade right around $60.

Online Commodity Trading Hot Pick - Light Sweet Crude

Have you ever considered hedging against high gas prices through online commodity trading? Wouldn't it be nice to go to the gas station, and instead of being upset that gas was up 50 cents per gallon from the previous day, be positively elated? You would be if you had purchased light sweet crude contracts for your online commodity trading account the day before.

Gasoline is made up of multiple components, with light sweet crude oil being one of the major ingredients. Since anyone can get involved in online commodity trading, everyone has the opportunity to profit from rising gas prices. When you think about it, no one really has much of a reason to complain. If you think gas prices are going up, open an online commodity trading account and buy light sweet crude futures. If oil goes up, the profits from your futures contracts will more than make up for any pain at the pump.

And just as with gold, there is an ETF alternative to online commodity trading in oil. United States Oil Fund (ticker USO) trades on the American Stock Exchange, and can be easily bought or sold through any online stock broker. One share of USO equals approximately one barrel of light sweet crude oil. So if you think gas prices are going higher, buy 100 shares of USO - you'll be happy if oil hits $100 per barrel!

One Final Tip...

If you decide to begin online commodity trading, be careful. The leverage that allows you to control thousands of dollars worth of gold, oil, or soybeans for just a few hundred bucks can quickly turn against you and cause you to lose more money than you have. Hundreds of people have gone bankrupt making bad futures trades.

For most people, commodities can be more safely played through the ETF's mentioned in this article. If you do insist on online commodity trading, make sure you develop a plan and stick to it. If you ever feel you're getting in over your head, immediately close out all trades and take a few days off. Even the best commodity traders need a break from the non-stop action of online commodity trading every once in a while.