Loding Loading ...
Trading in financial markets involves significant risk of loss which can exceed deposits and may not be suitable for all investors.
Before trading, please ensure that you fully understand the risks involved
Trading in financial markets involves significant risk of loss which can exceed deposits and may not be suitable for all investors. Before trading, please ensure that you fully understand the risks involved

What is commodity trading?

Discover what commodity trading is & the process of how to trade in the market. The platform offers over 100 commodity instruments such as oil, gas, gold & sugar.

Commodity trading covers the buying and selling of a large range of instruments including oil and gas, metals such as gold and silver and soft commodities like cocoa, coffee, wheat and sugar.

Commodity trading is as old as the financial markets, and perhaps even older than that. The first example of an organized exchange for trading commodities dates back to Amsterdam in 1530. These days there are a whole host of markets available to trade with just a few clicks of a mouse or taps on your mobile device, but some commodities remain as popular as ever.

Trade commodities

  • Choose your market – Choose the commodity market, such as Crude Oil Brent, Gold or Natural Gas, that you want to trade CFDs on.
  • Decide to buy or sell – Buy (go long) if you think prices will rise or sell (go short) if you think prices will go down.
  • Enter a trade size – Decide on how many units (CFDs) you want to trade. When trading CFDs the value of one unit can vary depending on the instrument you’ve chosen to trade.
  • Manage your risk – Select from a range of stop-loss orders including guaranteed stop-loss orders (GSLOs). Guaranteed stop-loss orders work exactly the same as regular stop-loss orders, except that for a premium, they guarantee to close you out of a trade at the price you specify regardless of market volatility or gapping. If the GSLO is not triggered, it will refund the premium charge.
  • Monitor your position – After placing your trade, monitor your open positions (including any stop orders or take profit orders) to follow your real-time profit or loss. Please remember that losses can exceed your deposits.
  • Close your position – If your trade is not automatically closed out as a result of a stop or take profit order being triggered, close your trade when you are ready.

Types of commodity trading

There are a range of commodities you can trade, including agricultural commodities such as corn, soybean, and wheat. However, it's the energy markets, in the form of oil and gas trading, and metal markets (like gold and silver) that tend to be more popular with commodity traders these days.

Over 100 spot and forward commodity instruments are available on the trading platform, including Crude Oil (Brent and West Texas), Gold, Silver, Copper, Natural Gas and Coffee (Arabica and Robusta). This includes both spot prices and prices for forward contracts.

One way to get a feel for commodity markets is to watch their moves over a period of time so you can experience the sort of things that happen and understand what makes prices change. And when you do start trading, it’s always sensible to start with small amounts and use risk management orders.

The commodity markets are traded in a similar way to other types of financial markets, but there are some points to be aware of in order to avoid any shocks or surprises when dipping your toe into commodities trading. In this article, we focus on two of the more actively traded commodities: oil and gold.

Trading oil

Although there are many different types and qualities of crude oil, the two popular types to trade are Brent Crude and US West Texas Intermediate (WTI). As these are slightly different blends of oil, the prices vary depending on which one you are trading

Factors influencing oil price

When trading commodities, it’s important to be aware of events that can have an impact on oil prices. Prices do not just depend on how much oil is being pumped out of the ground, for example. As it is a global fuel source, when the world economy is expanding and factories are working flat out, it stands to reason that world consumption of a commodity such as oil will go up.

As economies slow and demand drops, the price of oil and other commodities also tends to follow suit. In early 2016, crude oil was trading below $30 a barrel.

Since oil prices are also impacted by world events such as politics and socioeconomic situations, including the Middle East crisis, it helps as an oil trader to keep on top of news so as not to get caught out by an unexpected shift in oil prices.

Other factors influencing oil prices include decisions by the Organization of Petroleum Exporting Countries (OPEC) and other major oil producing nations, such as Iran, on how much oil is produced and supplied to the market.

An ability to try and forecast how well or badly the world economy may fare in the months ahead is a definite plus point when it comes to trading a commodity like oil. But there is plenty of news that can cause fluctuations in the price on a day-to-day basis – and on an even shorter-term scale than that. If for example the US releases figures that show its economy is improving more quickly than expected, this could cause a surge in the price of oil as commodity traders start to bet that demand will increase, consequently putting up the cost of a barrel.

Or it could be that an oil-producing country resists international pressure to stabilize oil prices by increasing production. This could see further slides in the oil price as investors worry that more of the commodity will be produced than is needed. It really is a market that can be buffeted by plenty of world events, so it pays to stay on top of major economic news releases.

Gold trading

Another enduringly popular commodity is gold, which has long been considered a store of wealth and has held a special allure for many of us – as the Californian gold rush back in the 1840s would undoubtedly attest. Nowadays it’s traded like any other financial instrument and is still an important commodity to many traders around the world.

Traditionally, in times of trouble and market volatility, gold is perceived as a 'safe haven' – somewhere for investors to store their money away from other riskier assets. Although the yellow metal can in theory be traded in many currencies, the typical market quote is to price gold in dollars, usually as 'dollars per troy ounce'. This relationship to the US dollar is an important one and is another factor that will have an influence on the price of gold. If the dollar becomes more attractive to investors and starts to rise, the price of gold will usually drop. In recent years, some people have seen the US dollar as a safe haven for their money and that has reduced the appeal of gold.

This is another aspect to weigh up when trading gold: the impact any moves in the dollar will have on the price of gold. For example, if the US central bank, the Federal Reserve, decided to cut interest rates, this would normally weaken the US dollar and lift the price of gold. As with oil, because gold is such a global commodity it pays to keep a watchful eye on the major economic announcements such as interest rates and unemployment figures, which are released on a regular basis.

Energy commodities

The energy markets are also popular among commodity traders. The advent of renewable energy has generated added interest for commodities such as national gas, heating oil and gasoline. As with the oil markets, world events and politics can have an impact on the energy markets, so it’s wise to keep an eye on news and economic releases.

Source: CMC Markets UK

Disclaimer: Century Financial Consultancy LLC (“CFC”) is Limited Liability Company incorporated under the Laws of UAE and is duly licensed and regulated by the Emirates Securities and Commodities Authority of UAE (SCA). This document is a marketing material and is for informational purposes only and must not be construed to be an advice to invest or otherwise in any investment or financial product. CFC does not guarantee as to adequacy, accuracy, completeness or reliability of any information or data contained herein and under no circumstances whatsoever none of such information or data be construed as an advice or trading strategy or recommendation to deal (Buy/Sell) in any investment or financial product. CFC is not responsible or liable for any result, gain or loss, based on this information, in whole or in part.

PLEASE READ THE FOLLOWING TERMS AND CONDITIONS OF ACCESS FOR THE PUBLICATION BEFORE THE USE THEREOF.

By use of the publication and continuing to access the publication, you accept these terms and conditions and undertake to be bound by the acceptance. CFC reserves the right to amend, remove, or add to the publication and Disclaimer at any time without any prior notice to you. Such modifications shall be effective immediately. Accordingly, please continue to review this Disclaimer whenever accessing, or using the publication. Your access of, and use of the publication, after modifications to the Disclaimer will constitute your acceptance of the terms and conditions of use of the publication, as modified. If, at any time, you do not wish to accept the content of this Disclaimer, you may not access, or use the publication. Any terms and conditions proposed by you which are in addition to or which conflict with this Disclaimer are expressly rejected by CFC and shall be of no force or effect.

No information as given herein by CFC in this publication should be construed as an offer, recommendation or solicitation to purchase or dispose of any securities/financial instruments/products or to enter in any transaction or adopt any hedging, trading or investment strategy. Neither this publication nor anything contained herein shall form the basis of any contract or commitment whatsoever. Distribution of this publication does not oblige CFC to enter into any transaction.

The content of this publication should not be considered legal, regulatory, credit, tax or accounting advice. Anyone proposing to rely on or use the information contained in the publication should independently verify and check the accuracy, completeness, reliability and suitability of the information and should obtain independent and specific advice from appropriate professionals or experts regarding information contained in this publication. CFC cannot be held responsible for the impact of any transactional costs or any taxes as may be applicable on transactions.

Information contained herein is based on various sources, including but not limited to public information, annual reports and statistical data that CFC considers reliable. However, CFC makes no representation or warranty as to the accuracy or completeness of any report or statistical data made in or in connection with this publication and accepts no responsibility whatsoever for any loss or damage caused by any act or omission taken as a result of the information contained in this publication. The articles does not take into account the investment objectives, financial situations and specific needs of recipients. The recipient of this publication must make its own independent decisions regarding whether this communication and any securities or financial instruments mentioned herein, is appropriate in the light of its existing portfolio holdings and/or investment needs.

This document is a marketing material and has been prepared by individual(s), marketing and/or research personnel of CFC. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is purely a marketing communication. In this publication, any opinions, news, research, analysis, prices, or other information constitute is a general market commentary, and do not constitute the opinion or advice of CFC or any form of personal or investment advice. CFC neither endorses nor guarantees offerings of third party, nor is CFC responsible for the content, veracity or opinions of third-party speakers, presenters, participants or providers. CFC will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

Charts, graphs and related data or information provided in this publication are intended to serve for illustrative purposes only. The information contained in this publication is prepared as of a particular date and time and will not reflect subsequent changes in the market or changes in any other factors relevant to their determination. All statements as to future matters are not guaranteed to be accurate. CFC expressly disclaims any obligation to update or revise any forward-looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

Staff members/employees of CFC may provide/present oral or written market commentary or analysis to you that reflect opinions that are contrary to the opinions expressed in this research and may contain insights and reports that are inconsistent with the views expressed in this publication. Neither CFC nor any of its affiliates, group companies, directors, employees, agents or representatives assume any liability nor shall they be made liable for any damages whether direct, indirect, special or consequential including loss of revenue or profits that may arise from or in connection with the use of the information provided in this publication.

Information or data provided by means in this publication may have many inherent limitations, like module errors or lack accuracy in its historical data. Data included in the publication may rely on models that do not reflect or take into account all potentially significant factors such as market risk, liquidity risk, credit risk etc.

The use of our information, products and services should be on your own due diligence and you agree that CFC is not liable for any failure to achieve desired return on investment that is in any manner related to availing of services or products of CFC and use of our information, products and services. You acknowledge and agree that past investment performance is not indicative of the future performance results of any investment and that the information contained herein is not to be used as an indication for the future performance of any investment activity.

This publication is being furnished to you solely for your information and neither it nor any part of it may be used, forwarded, disclosed, distributed or delivered to anyone else. You may not copy, reproduce, display, modify or create derivative works from any data or information contained in this publication.

Services offered by CFC include products that are traded on margin and can result in losses that exceed deposits. Before deciding to trade on margin products, you should consider your investment objectives, risk tolerance and your level of experience on these products. Trading with leverage carries significant risk of losses and as such margin products are not suitable for every investor and you should ensure that you understand the risks involved and should seek independent advice from professionals or experts if necessary.

trade-talks
brainy-bull
mental-funda
wow
get-started