Constraints to commodity trading - SS1 Commerce Past Questions and Answers - page 1

Market risk

Price volatility

Oversupply and price pressure

Seasonality

Reliable market data access

Market risk in commodity trading refers to the overall risk associated with the broader market conditions. It includes factors like economic downturns, regulatory changes, and unexpected events that can impact commodity prices and market dynamics. Market risk affects all participants in commodity trading and can result in losses or reduced profitability.

Price volatility in commodity trading can create challenges and constraints as it introduces uncertainty and risk. For example, sudden price fluctuations caused by weather conditions, geopolitical events, or supply-demand imbalances can make it difficult for traders to predict and manage price movements effectively. This volatility can lead to increased trading risks and impact the profitability of trading positions.