What is commodity CFD trading and how does it work?

From oil and gold to natural gas and cotton, these assets keep the world spinning as they are strongly linked to global events as well as certain currencies like the AUD, USD, and CAD.

What are the main types of commodities?

With markets.com, you can trade different types of commodities on our platforms: energies & metals (also known as hard commodities), and grains plus other diverse goods (known as soft commodities).

You can start your trading journey for CFDs on commodities with energies such as natural gas, crude oil, Brent oil or heating oil. With us, you can trade CFDs on popular metals, such as gold, silver, platinum, palladium, and copper. Apart from the energy and metal contracts, we also offer a batch of soft commodities products, including cocoa, sugar, wheat, corn, and coffee.

How does commodity trading work?

People engage in commodity trading globally across various exchanges, including CME, ICE, and Euronext. We provide an alternative way to invest in commodities: through Contracts for Difference (CFDs).

When trading CFDs on commodities, you don’t need to physically own the assets; instead, you trade based on their price fluctuations.

This makes the commodities market significant for CFD traders, as prices can experience dramatic shifts due to sudden changes in supply and demand. However, it's important to approach this volatility with caution, as it can also result in increased losses.

Factors Affecting Commodity Prices

Several factors influence the prices of commodities. Here are the key ones:
1. Supply and Demand
Commodity prices tend to remain stable when supply and demand are balanced. However, significant fluctuations can occur when the market anticipates supply disruptions—due to production cuts, natural disasters, or major global events—or when demand rises as a result of population growth or economic expansion.

2. Price Inflation
Inflation plays a crucial role in determining commodity prices. Rising inflation often leads to higher commodity prices, which can impact consumer price index (CPI) or producer price index (PPI) reports that reflect the overall economic conditions worldwide.

3. Currency Strength
The most commonly traded commodities are closely tied to major forex pairs. For instance, since most commodities are priced in U.S. dollars, monitoring the Dollar Index is essential. Additionally, the Canadian dollar is closely linked to oil prices, given that Canada is a significant exporter of crude oil.

How to trade CFDs on Commodities on markets.com?

You can open a position of CFDs on Commodities with markets.com through the device of your choice, be it a smartphone, PC, or tablet.

It’s really easy:
1. Log in to your account or create account

2. Go to the Commodities section and choose your favorite instrument

3. Set your trade size

4. Choose direction (Buy or Sell) based on your assessment of the influencing factors

5. Place your trade

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.