How to Invest In Natural Gas?
There are two ways to invest in natural gas, you can invest directly or indirectly in natural gas. In this article, we discuss different ways to invest in natural gas.
Actively trade natural gas
You can invest in natural gas using CFDs. But when you trade CFDs, there is a small transaction fee per trade.
CFD trading means that you are only trading the price of natural gas, not the natural gas raw material itself. One of the big advantages is that you can also choose to go short.
Invest in Natural Gas Stocks
You can also invest in companies that are engaged in the extraction of natural gas. Investing in these companies can be attractive when natural gas prices are high. For example, Royal Dutch Shell and Gazprom are two companies that regularly trade natural gas.
Before you start investing in natural gas stocks, it’s important to look at company data. After all, there are factors other than natural gas prices that determine the development of a company’s stock price. Even if natural gas prices rise, a company can have bad results.
Invest in Natural Gas Funds
You can also invest in natural gas through ETFs. ETF stands for Exchange Traded Fund. ETFs are funds that are freely traded on stock exchanges. There are many funds that track the price of natural gas raw materials.
A good example is the VelocityShares 3X Long Natural Gas ETF. The fund monitors gas prices as closely as possible. Leverage is used within the fund, so the price of this fund will rise more than the price of natural gas itself. Leverage can get you high returns quickly. But if the price of natural gas plummets, you’ll also lose a considerable amount quickly.
Another fund option is the United States Natural Gas Fund or UNG. The fund focuses on natural gas prices within the United States. You can use this fund to speculate on rising and falling prices for raw materials.
How is the price of natural gas determined?
Natural gas is widely used, in many countries it is used for cooking, or as a raw material for power plants.
If you want to determine whether buying natural gas is a wise move in the long run, global demand must be considered. For example, gas demand in the Netherlands is likely to decrease as the government mandates the use of electricity instead of gas for cooking. However, this does not mean that natural gas prices in emerging economies such as China will not rise.
Natural gas prices are partly tied to the global economy. In good times, there is usually more demand for natural gas. But even in times of economic downturn, demand for natural gas remains. Even the weather can have a significant impact on prices. Cold winters and warm summers can lead to higher prices.
In winter, more natural gas is used to heat homes. When the temperature is high, more electricity is used to cool the house. Finally, the dollar price also affects the price of natural gas. The price of natural gas is in U.S. dollars. With cheap dollars, the price of natural gas usually goes up. That’s because importers outside the U.S. can buy and store natural gas more cheaply.
In short, natural gas prices generally rise given a good global economy, extremely hot or cold weather, and low dollar prices. Of course, these are short-lived and other factors come into play. But it could all be a good reason to invest in natural gas.
How to actively trade natural gas?
Investing in natural gas is becoming more common. This type of investment is characterized by wild fluctuations in price. Therefore, when investing in natural gas, it is wise to buy large quantities of natural gas at a lower cost price. And that doesn’t mean you need a lot of money.
When gas prices are unusually low, you can leverage leverage to buy a lot of products at once without investing a huge amount of money. Large positions in natural gas can be opened with only a small investment.
But it is important to know that if you invest in natural gas CFDs, this means that you should pay close attention to the price movements of natural gas. Especially if you want to sell gas outright when prices are rising fast, you have to keep up with gas prices!
You also use the stop loss function. With stop loss, when the price falls to a certain amount, the system will automatically close the position to avoid too much loss.