What are CFDs
- Commodities trading
Commodities are basic items of consumption of the worldwide economy. Do you have an opinion on gold, silver or coffee? Act on it!
Commodities are traded around the world on different exchanges and are usually traded as futures contracts, which is an agreement to trade at a set price and set date. On our platforms we provide CFDs, which are contracts, based on the price of an underlying asset, that don’t grant ownership of the physical goods. CFD traders like this aspect since you do not have to actually own the asset, yet you can trade them whenever you want.
With a CFD trading account at Friedberg Direct you can trade a wide range of markets from metals to energies and more.
- Trade hard or soft commodities on our advanced MetaTrader 4 & MetaTrader 5 platforms
- Start today with a small amount and trade with leverage
- Get competitive spreads
- 24/5 live technical support in your language
What are Commodities
A commodity is a good used in business or on a market. Each commodity, when traded on an exchange, must meet standards and grades. They may each be slightly different, however, ultimately are the same amongst all producers. There are two different kinds of commodities, soft and hard:
Soft commodities – This refers to items that are grown as opposed to mined. For example, agricultural products such as sugar, corn, wheat, coffee and more. Produced by farmers, these instruments are highly sensitive to climate and weather changes, and have cyclical price patterns dictated by seasons.
Various factors can affect the prices of commodities and contribute to their fluctuation significantly.
Supply and Demand – If supply and demand balance out, prices should stay the same. However, anytime the market thinks the supply will be lower due to weather or production cuts, prices tend to go higher, and vice versa; higher supplies tent to lead to lower prices.
Stock and Inventories – Production of these commodity prices can be affected by the following; weather, crop diseases, production issues with staff, political and economic environments which form additional charges such as taxes, trade laws, subsides from governments etc.
Currency Strength – Connections between some of the worlds most traded commodities and currency pairs are common. For example, the Canadian dollar (CAD) is connected to oil trading prices since Canada is a large exporter of oil.
If you are aware of these common connections, then monitoring them and trading at the right time are important to making the right decisions in successful trading.
It should be noted that most commodities are priced in US dollars, and thus it would be wise to monitor the dollar index in order to better forecast the price dynamics. We allow forex trading from the same trading platform, so you can use these correlations to your advantage.
Inflation – When there is inflation, the price of a commodity usually changes accordingly.
Don’t forget to check out the CFD Rollover dates to know when the current contracts expire.
Why Trade Commodities
Having a variety of commodities in your trading portfolio can be a great addition and can potentially increase returns. Commodities do not pay dividends, at the same time they do not go bankrupt.
Some great advantages are:
- They can protect against inflation; when economies experience inflation, the prices of commodities have a tendency to go up.
- Profits can be large; commodity CFDs are traded on margin, which means higher potential returns as well as risks.
- Low startup costs, all you need is your computer and
- Profit from long or short positions
Ready to start trading commodities with Friedberg Direct? Register today and enjoy the benefits of trading with a regulated Canadian broker!
Main Commodities FAQ
What are the best commodities to trade?
The most popular commodities for traders are gold and oil. This is because both enjoy excellent liquidity and sources of information. However these are not necessarily the best commodities to trade. The best commodity for any trader is the one they understand the best. One where they have detailed knowledge about the market, or about supply and demand for the particular commodity. It’s this deep knowledge that makes it easier to successfully trade any commodity. And anyone can get this type of knowledge through research and study.
Why is it better to trade commodities with CFDs?
The traditional way to trade commodities is by using futures contracts. However this is not always the best way to trade commodities. For one thing many traders don’t have a futures trading account. And trading futures requires a fairly large upfront investment. Plus futures involve leverage, and while this can inflate gains, it can also magnify losses. All of these issues can be avoided by using CFDs to trade commodities. Liquidity is never an issue with CFDs, you can get started with a few hundred dollars, and you control the leverage, or lack of leverage, when trading CFDs.
Is it possible to trade commodities online?
Many people think about trading commodities and they get the image of the trading pit, similar to what you see in the movie Trading Places, where Eddie Murphy and Dan Aykroyd corner the market on orange juice futures. While commodities trading may have looked like that in the past, in the 21st century it is electronic and commodities markets can be traded online from all corners of the globe. All that’s needed is a trading account with a broker that offers access to the commodity markets and anyone can trade commodities online.
These FAQs, comments/analysis do not take into consideration your individual personal circumstances and trading objectives. Therefore, they should not be considered as a personal recommendation or investment advice. They are intended for educational purposes only. Past performance is not indicative of future results. There is no guarantee that the contents or instructions will result in profits or not result in losses.