Commodities Trading

Commodity trading is the buying and selling of a wide range of commodities such as energy, metals,
oil, gas and agricultural products.

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Trade Commodities with capitalzfx

Click here for our full list of Commodities and typical spreads

Trading commodities CFDs ("contracts for difference") is a great way to diversify your portfolio and hedge risks. capitalzfx has carved a niche for itself in the commodity trading market in Australia, offering the optimal trading experience.

Choosing from an extensive portfolio of financial products, while benefiting from the latest real-time technology and available commodity prices. When you choose to trade commodity CFDs, you get access to commodity prices worldwide with high execution speeds, low slippage, deep liquidity and tight spreads.

Trade in CFDs on a wide range of universal commodities, including gold (XAU), silver (XAG) and oil (CL, WTI) with a regulated broker provider giving you access to different asset classes,sophisticated risk management and trading tools.

What are the benefits of commodities trading?

Leverage up to 500:1

Choose from a wide range of commodities, such as energy, metals and agricultural products

Enter and exit trades whenever you want to 24/5

Trade in any direction you think the markets will go. Sell and go short or buy to go long, maximizing trading opportunities and minimizing risks.

No price manipulation

Hedge Risks - Hedge your investment risks with high-value assets, like gold (XAU), silver (XAG), and Oil (WTI / CL)

Benefit from low margin, low-cost trading, without compromising execution

The Top Ten Commodities to Trade

Commodities are essentially the raw materials from which other goods are created; the basic building blocks of the global economy. Consequently, they often serve as an excellent investment vehicle. Commodities fall into two broad categories: hard commodities and soft commodities.

Hard commodities are those that are mined from the earth or extracted from natural resources. This category includes metals such as gold, silver and iron, and energies such as oil, natural gas and coal. Soft commodities are agricultural products such as livestock and crops. The commodity markets are popular among traders. This is because they are highly volatile, a feature that provides traders with greater opportunities for success. What separates commodities from other goods is the fact they are interchangeable and standardised, with their values set by the relevant commodity exchange.

However, when it comes to commodities trading, not all commodities are equal.

Some are better than others. With a wide range of commodities on the market, it’s important to know what makes a commodity good for trading.

Crude Oil
Gold
Silver
Platinum and Palladium
Base Metals: Copper, Iron, Steel, Aluminium
Coffee
Natural Gas
Soya Beans
Corn
Wheat

What Makes a Good Trading Commodity?

When trading commodities, liquidity is the primary thing you should consider. This is because liquidity determines the ease with which you can sell or buy a commodity. A liquid market is generally associated with relatively lower risk as there will likely be someone willing to take the other side of a trading position. A good commodity will usually have a well-established market of buyers and sellers at any given time.

Highly liquidity also means that a commodity will have less risk of slippage. Slippage refers to the losses that occur when bid-offer spreads are wide and it’s a common occurrence among commodities that exhibit low degrees of liquidity. Liquidity differentiates the most-traded commodities from the rest of the flock. This leads us to an all-important question.

What is the best Platform to trade Commodities?

MetaTrader 4. The world's most popular trading platform.

Discover the benefits of Commodities trading on one of the most powerful trading platforms available, MetaTrader 4 (MT4). Available across desktop and mobile devices.

Spreads from 0.0 pips & leverage up to 500:1

Customisable interface, including colours of technical indicators

One-click trading

Live price streaming on Live accounts and Demo accounts 128-bits encryption for secure trading

Expert Advisors (EAs)

Customisable alerts

Compatible with iOS, Android and Mac devices

Are there more platform options?

We recommend MT4 for Commodities but a range of products can also be traded on MT5 and Iress platforms.

6 Reasons to Choose capitalzfx

A Global Forex broker.

Globally

Segregated client funds

Tighter Spreads Market

leading spreads from 0.0 pips, 24/5

Faster Execution

Low latency, ultra-fast execution under 40ms

Advanced Platforms

MT4, MT5, WebTrader, cTrader & TradingView with superior client portal

24/7 Multilingual Customer Support

Award-winning support & personal account managers

Established in 2005

15+ years trading experience

What is Commodities Trading?

Commodities trading represents the buying and selling of quantity sets of homogeneous and near-homogeneous assets. Popular commodities include the West Texas Intermediate (WTI), Brent Crude Oil (XTI), Gold (XAU) and other precious metals, and soft commodities such as Wheat, Coffee, Cocoa, Soya etc. Price movements in commodities are relatively slow and are usually seen as bellwethers and market indicators for the overall health of the industry that produces and consumes them.

Commodity prices can be impacted by various factors, including adverse weather and seasonal availability, natural disasters, severe climate changes and other non-market factors generally found in other financial instruments. Typically, trading in commodities can be either speculative or for hedging purposes. Traders can trade commodity markets to express their outlook on certain industries, or to hedge their trading portfolio by taking an opposite position in a commodity to offset potential losses Hedging as a risk management strategy has its purpose to minimize potential losses but could also result in reducted returns.

Through careful analysis, CFD traders speculate on the direction of commodities prices and attempt to capture potential profits based on price fluctuations and volatility. The market is open 24 hours a day, 5 days a week, from 5pm EST on Sunday to 4 p.m. EST on Friday.

Example of Leveraged
CFD Commodities Trading

Suppose you want to trade CFDs, where the underlying asset is the XTIUSD a commodity, also known as Crude Oil. Let us suppose that the XTIUSD is trading at:

You decide to buy 2,000 barrels of XTIUSD because you think that the XTIUSD price will rise in the future. Your margin rate is 1%. This means that you need to deposit 1% of the total position value into your margin account.

Now, in the next hour, if the price moves to 83.10/83.11, you have a winning trade. You could close your position by selling at the current price of USD 83.10

In this case, the price of crude oil moved in your favor. But, had the price declined instead, moving against your prediction, you could have made a loss. If that loss reduced your free equity to negative, your broker would have issued a margin call and will close all your trades if the equity falls at 50% of 1660.

If the price of XTIUSD	To	You could Gain or Lose for a Long Position	Resulting in a Return of the Initial Margin
Rises by 1%	83.84/83.85	USD 1660	100%
Declines by 1%	82.18/82.19	USD -1660	-100%

CFD Commodities (MT4/MT5)

Symbol	Product	Standard A/c
Symbol	Product	Min	Avg
WTI	West Texas Intermediate Crude Oil vs US Dollar Future	-	0.02
XBRUSD	Brent Crude Oil vs US Dollar Cash	-	0.03
XNGUSD	Natural Gas vs US Dollar Cash	-	0.02
XTIUSD	West Texas Intermediate Crude Oil vs US Dollar Cash	-	0.03
BRENT	Brent Crude Oil vs US Dollar Future	-	0.03

Soft Commodities (MT4/MT5)

Symbol	Product	Standard A/c
Symbol	Product	Min	Avg
COCOA	Cocoa vs US Dollar Cash	-	3.96
COTTON	Us Cotton No.2 vs US Dollar Future	-	2.2
SUGAR	Us Sugar No.11 vs US Dollar Future	-	2.06
COFFEE	US Coffee vs US Dollar Future	-	0.72
CORN	Corn vs US Dollar Cash	-	0.71
SOYBEANS	Soybeans vs US Dollar Cash	-	1.11
WHEAT	Wheat vs US Dollar Cash	-	2.11

Introduction to Commodities Markets

Learn more about major commodity markets

Gold Markets

Throughout history, gold has always been seen as a valuable commodity, and for good reason. In addition to being an in-demand precious metal in many industries, gold is an ideal hedge for financial market risks, especially during periods of macroeconomic and geopolitical uncertainty. There is generally strong global market demand for gold making it one of the most actively traded commodities in the world.

If you want to trade gold, there are several options open to you. You can directly invest in physical gold by purchasing gold bullion from bullion dealers or through gold exchange-traded funds (ETFs) that hold the commodity. Alternatively, you can trade gold through ETFs that track the movements of the commodity or purchase gold CFDs (contracts for difference) which track the asset’s underlying price. The latter is one of the most popular ways of trading gold and it’s quite easy to see why when you know how trading gold CFDs works.

Wheat Markets

Wheat is one of the most important food components and is cultivated globally. This grain has always piqued investors’ interests because it allows them to participate in the agricultural markets by trading wheat CFDs without holding actual tons of it. Wheat commodity trading can take place on several exchanges but there are two main that are listed in wheat futures: Chicago Board of Trade and NYSE Euronext. Wheat futures prices are quoted in USD and cents (USD) per bushel.

The countries producing the biggest quantity of wheat are the European Union with 152,000 thousand metric tons annually, China with 133,600 and India with 106,210. These three countries are amongst the largest producers of wheat worldwide. The countries with the highest consumption of wheat are China with 131,000 thousand tons, India with 96,725 and Australia using the wheat for feeding their masses of livestock.

Coffee Markets

Coffee has become one οf the world’s most profitable commodities. By the 18th century, its cοnsumptiοn and popularity increased significantly in the US during the Civil war. Arabica and Robusta are two different coffee varieties. Arabica is considered a more flavourful bean, with less caffeine and is premium attracting a higher market price. Robusta contains more caffeine and has a bitter taste. Trend followers like to trade Robusta due to its volatility, and traders who prefer more stability choose Arabica.

The price of coffee can be affected by factors such as changing weather conditions, distribution costs, geopolitics, global health issues and the strength of the US dollar. Also, the price of coffee is moved by factors that relate to supply and demand. Major coffee chains in China increased the price of beverages amid rising costs and inflation. Luckin Coffee, Starbucks and Tim Hortons raised prices by between 1 yuan ($0.16) and 3 yuan ($0.47) according to mobile apps and online menus. Starbucks operates more than 5,500 stores in China and after its first-quarter reporting in February 2022, cautioned that rising inflation and staff shortages continued to present a challenging trading environment globally.

Oil Markets

Crude oil is a liquid in the Earth, and it is made of hydrocarbons, organic compounds, and tiny amounts of metal. There are many types of crude produced around the world, and the quality of each is reflected in the value. One of its quality characteristics is the sulfur content, which can be defined as sweet or sour, and density ranges from heavy to light. If crudes are light and sweet, there are more expensive as opposed to energy products such as diesel and gasoline. There is a high demand for these grades since they can be processed with refineries requiring less energy.

Many types of crude oil differ in their consistency and density, depending on how and where it is extracted. There are over 160 types of crude oil traded on the market, but Brent Crude and WTI serve the most as the oil benchmarks in the global markets. The WTI oil is taken from Wells in the United States and sent to Oklahoma by pipeline. It is mostly referred to as US crude, and it has expensive shipping costs when there is demand around the world. The WTI oil is very sweet and light, making it ideal for gasoline refining. WTI is a higher quality crude than Brent, and it is always priced at a premium.

Types of Commodities

Commodities are raw materials or agricultural outputs that appear naturally, and are used in the production of other goods. They are recognised as the building blocks of the global economy and play a significant role in financial markets.

There are two types of commodities

Hard commodities: Refers to natural resources that are mined or extracted

Soft commodities: Agricultural products or livestock

For the purposes of trading, Commodities are further classified into four main categories:

Metals: Includes precious metals such as gold, silver, platinum, palladium and copper

Energy: Crude oil and natural gas are the main energy products that are traded. Heating oil, gasoline and electricity are among others

Agriculture: Agricultural commodities are centred around staple crops and animals. Wheat, rice, corn, soybeans coffee are among the most common crops. The classification of animals includes livestock and meat such as live cattle, pork, and eggs.

Livestock and Meat: Eggs, Pork, Cattle and more

What Are the Most Traded Commodities?

The most traded Commodities are those which have an established market of buyers and sellers. This translates to high levels of liquidity and lower trading costs - two of the main attractions when trading Commodities CFDs.

Gold: Of the precious metals, gold continues to lead the way. Throughout history, gold has been a valuable commodity. The gold standard was in operation for almost a century and central banks continue to hold gold reserves. It is easily transferable for cash and often used as part of a hedging trading strategy as it often trades opposite to the United States dollar (USD).

Other Metals: Silver, platinum and palladium are among the most traded commodities. As they are considered a safe-haven investment, there is a wide range of Trading Strategies Using Precious Metals.

Crude Oil: The widespread use of oil makes it one of the most in-demand commodities. Petrol and diesel are examples of refined oil which highlights its importance in all forms of transportation. Its value as a source of energy is the reason why oil prices are heavily scrutinised.

Read our comprehensive list of Top Commodities To Trade.

How to Trade Commodities?

There are several ways to trade commodities such as precious metals and oil. As they are a physical product, investors have the option of purchasing precious metals such as gold, silver and palladium. One of the main hurdles of doing so is the cost associated with storing such a valuable product.

This is one of the reasons why commodity futures trading emerged. Through exchange-traded funds (ETFs), you are able to enter into an agreement to buy or sell shares of an underlying ETF at an agreed price prior to a specified date. Many large corporations use futures markets to hedge against market volatility.

capitalzfx offer CFD trading in commodities where you do not own the underlying asset and enter into a contract which, unlike futures contracts, do not have a specified end date. Trading Gold CFDs allows you to hedge against high risk market conditions using your margin trading account. Similarly, gold is also traded against major currencies in Forex Trading.

Commodities Trading - FAQ

What are the major commodity exchanges?

New York Board of Trade (NYBOT)
Chicago Mercantile Exchange (CME)
New York Mercantile Exchange (NYMEX)
Intercontinental Exchange (ICE)
CBOT - Chicago Board of Trade (CBOT)

What margin am I required to deposit?

Commodities generally require a low margin, in particular popular precious metals such as gold. This allows traders to open large positions and gain exposure to market prices.

What is a commodity?

A commodity is a basic material and economic good mainly used as a resource in manufacturing production and services. Commodities are categorised into hard and soft materials. The four main types of commodities are metals, livestock and meat, agricultural, and energy products. In economics, a deliverable commodity is an asset class of futures contracts and options (derivative securities) interchangeable with other fungible goods in the commodity market. Commodities trading volumes on a futures exchange increase in periods of high inflation and general instabilities. Thus, traders and investors who buy and sell contracts often use commodity trading as portfolio diversification and inflation hedge.

How do I start trading commodities?

Account Verification & Funding → Open a Live Account and a Demo Account, determine the amount of funding over the required minimum and activate your trading account with the necessary KYC process.

Education & Practise → Learn, research diligently and familiarise yourself with commodities trading from the robust educational section. Understand how the commodity market works and practise on the Demo Account.

Market Research & Plan your trade → Prior to starting commodity trading on your Live Account, browse through capitalzfx analysis, market news and tools, including the economic calendar, to choose a commodity maket asset to trade CFDs on.

Trade Size & Market Direction → After you have carefully selected the financial instrument (commodity) you want to trade on, take an informed decision on the size of your trade (lots, pip value etc). If you expect the commodity price will to rise you go long (Buy). If you expect a decrease of the commodity value you go short (Sell).

Risk Management & Account Protection → There are numerous risk assessment tools, features and trading strategies to help you protect your trades from market volatility and price fluctuations. Use the traders toolbox instruments, including Stop Loss order, Take Profit, Hedging Strategy to reduce the trading risks.

Trade Monitoring & Close Trade → Monitor your trades, track profit and losses and protect your trading account with real-time actions, using any of the available trading platforms, webtrader and mobile trading application. Close your trade when you want if you did not reach profit or loss limits.

What do commodity traders do?

Commodity traders are individuals or institutions that buy and sell commodities, including energy products, metals, livestock, and agricultural products in the futures exchange. Commodity traders are driven by different goals, thus commodities and futures contracts are traded directly or indirectly through commodity-related companies and corporations. Traders often use fundamental and technical analysis, indicators, and other financial instruments when trading commodities.

The main three type of traders that buy and sell in the commodity markets are three. Traders representing commodity producers with an aim to sell their assets for portfolio hedging purposes while broker firms execute orders on behalf of private and commercial clients, helping the market liquidity. Other traders want to speculate on the future price of a commodity and profit from the price movements since commodity prices can be affected by both market news and non-market factors.

What are the most traded commodities in the world?

The most traded commodities in the world are the highly volatile WTI Crude Oil and Brent Crude Oil, Natural Gas, Gold and other base metals, Coffee, Sugar, Wheat, Cotto, Corn and Soybeans.

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