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How to trade soybeans online
This beginner’s guide to soybeans explains how to trade commodities, the key things to look out for that affect crops and grains, and where you can start trading yourself.
Compare the best platforms for trading soybeans
To start trading now, use one of the platforms below. These are some of the best commodities brokers around, chosen by our team of experts. If you don’t want to trade just yet, keep reading to learn more.
How to trade soybeans online – a step-by-step guide
Commodities trading is quite simple once you understand the process but it can take some getting used to. Follow this step-by-step guide to help you get started.
- Find a broker. Look for a platform that charges low trading fees and offers the widest range of features. Use the table above to help you.
- Create an account. Before you can start trading, you need to sign up for an account. Be prepared with some contact details and a form of photo ID, like a passport or driving licence, to verify your identity.
- Deposit funds. Most brokers accept deposits done via bank transfer or credit/debit card. If you want to use a different method – such as PayPal or Stripe – then it might not be accepted everywhere so be sure to check first.
- Decide whether to go long or short. If you think a commodity is going to go up in price, take a ‘long’ (buy) position. If you expect it to go down, go ‘short’ (sell).
- Execute trade. Find the commodity on your chosen platform to carry out the trade. There are a few different soybean markets, so make sure you choose the right one.
- Set stops and limits (optional). Limits are a way of reducing your risk. You can place orders to execute trades as soon as the price hits a certain level – to either lock in profits or minimise your losses.
What is a soybean? And why does it have value?
Soybeans are beans that form the basis of foods and chemical products. It holds the hallowed title of ‘most economically important bean in the world’, as it’s packed full of protein and used to produce foods like tofu and soy sauce as well as animal feed.
What affects the price of soybeans?
Mainly extreme weather and the supply or price of other crops like corn. Poor weather conditions destroy harvests, while it’s easy for farmers to switch crops at the start of a planting cycle depending on what offers a better price. Both factors that cause demand to outstrip supply and push the price up.
Sentiment can also play a big role in the market. Agriculture commodities are often traded a few months before they’re actually harvested. There are regular releases from government departments detailing expectations for the next harvest, which in turn prompt people to buy or sell based on those future numbers.
How has soybeans performed in recent years?
It hit its highest price in nearly a decade in 2021, as crops in Argentina were hit by heavy rains and demand from China – the world’s biggest importer of the bean – grew dramatically. Predictions of a drought that would affect US farmers helped push the price up even further, above $15 a bushel and close to an all-time high.
In between peaks in 2013 and 2021, the price has stayed manageable. Often that means a series of good harvests, but since 2018 it was suppressed in part by a disease that hit hogs in China and drove down the demand for animal feed.
Should I start trading soybeans now?
If you are an experienced commodities trader and understand the market for crops. If not, then it pays to take a bit more time to learn about how soybean trading works, and understand the relationship between different crops, planting cycles, and the day-to-day trading market.
A simpler way to invest in soybeans is often to buy stocks in a company that produces them, or is involved with the agriculture industry. Similarly, you can buy exchange-traded funds (ETF) that own a collection of stocks from within the industry.
Whichever method you choose, you need to stay on the lookout for events – like trade deals or extreme weather conditions – that might affect the soybean price. The links below can help you keep up to date.
Why I think that investing in soybeans is a good move in 2020
Trading soybeans for beginners
If you haven’t traded commodities before, make sure to research the market and prepare carefully before you start. Here are some of the most important things you need to do before trading, followed by a guide on the different ways to do it.
What to do before starting to trade
The best way to get started is by setting guidelines and rules for yourself so that you don’t make mistakes later. Follow this list to get a basic idea of what to do before you dive into the soybean trade.
- Research the commodity. Invest in what you know. Learn what affects crop markets, like weather conditions, alternative grains, and even things like demand for meat that might mean ranchers need more feed in the future.
- Make sure you understand the basics of commodities trading. Trading is different to investing in stocks, so get familiar with words like ‘calls’, ‘puts’, and ‘futures’. You can learn more about these below.
- Decide between long term and short term trading. Choose a strategy based on how soon you want to see results. If you’re trying to make a quick buck, you need to be more aggressive (and take more risks) than if you’re content to build wealth over time.
- Set a budget. Don’t even invest more than you can afford to lose. Setting a budget at the start means you aren’t tempted to keep investing more if something goes wrong, and you can use the budget to help you choose how to invest. If you have a smaller budget, it’s often worth using ETFs or funds rather than putting it all on one trade.
- Find a broker platform. Choose a broker that suits your trading style. There are lots out there that offer different features, such as demo trading for beginners or advanced features for experienced traders.
The different ways to trade soybeans
When it comes to trading, there are many different ways to do it. Read through the list below to familiarise yourself with the options, so you can make an informed decision as to the best method for you.
- Spot trading. ‘Spot’ trading means buying or selling soybeans at today’s market price. Generally, this is done using contracts for difference (CFDs), which you use to predict whether that price is going to go up or down by a fixed point in the future and earn money based on the difference.
- Futures contracts. Futures are a means of trading on the price a few months in advance. When you buy a future you agree to buy soybeans at a set price on a fixed date in the future. The idea is to buy a future if you expect the price to be higher on that date, with the aim of then selling the contract and making a profit on the difference.
- Options contracts. An option is like a down payment that gives you the right to buy a commodity at a fixed date in the future. It’s similar to a future, except it’s an option rather than an obligation to buy. There are two types of options: calls, which represent the right to buy, and puts, which represent the right to sell.
- Spread betting. Spread betting is a prediction on the movement of an entire market. You bet your stake on each point the market moves a certain way. Your return is the stake multiplied by the points moved, which is what you earn if you were right, or owe if you were wrong.
- Stocks. Buying stocks is an alternative way to invest in a commodity. Stocks in companies that operate in the soybean trade tend to move in the same way as the market price, but are less volatile and easier to buy. You can buy shares in any company listed on a major stock exchange through your broker.
- ETFs. An ETF owns a portfolio of stocks from within one particular industry or sector. That means its performance reflects how well that industry is doing. You can buy an ETF like you would a stock, and they are a great way to reduce your risk by owning shares in lots of companies without needing a big budget to do so.
To learn more about any of these trading methods, head to our commodities courses. To start trading straight away, just head to your favourite broker platform.