How to Trade Commodities on eToro – Ultimate Guide to eToro Commodity Trading 2021

Updated:

As you likely know, the commodities market entails trading, selling, and buying primary economic sector goods. The good news is, thanks to the popular social trading platform eToro – it’s never been easier to trade commodities from your own home.

Whether you are a seasoned trader but find commodities a little intimidating, or are brand new to the scene altogether -this guide will tell you everything you need to know about how to trade commodities on eToro.

This includes how to sign up, what commodities you can trade, and how to create an order. We also divulge how to cash out your profits, as well as offering some popular strategies along the way.

Table of Content

     

    Eightcap - Regulated Platform With Tight Spreads

    Our Rating

    • Minimum deposit of just $250
    • 100% commission-free platform with tight spreads
    • Fee-free payments via debit/credit cards and e-wallets
    • Thousands of CFD markets including Forex, Shares, Commodities, and Cryptocurrencies
    Start your journey towards reaching all your financial goals right here.

     

    Step 1: Open an Account on eToro

    Before we go into detail about how to trade commodities on eToro, you need to set up an account with the broker. If you have already signed up and are just here to learn how to trade on the platform – skip forward to Step 3.

    For those that need to go through the process of signing up, you will be pleased to know it’s super easy and takes a matter of minutes.

    To get things started, head over to the eToro website and click ‘Join Now’. A sign-up box will appear, at which point you will need to fill in the following details:

    • First and Last Name
    • Nationality
    • Residential Address
    • Date of Birth
    • Email Address
    • Mobile Phone Number
    • National Tax Number

    It will also be necessary to enter a username and memorable password for your account. Next, you will receive a code from eToro via SMS. You must enter this when prompted to do so.

    Next, you will need to go through the verification procedure.

    This entails uploading 2 documents. The first will be a government-issued ID, such as your passport or driving license. The second needs to provide proof of address. This can be a utility bill or bank/credit card statement.

    eToro is generally able to process your ID automatically and within minutes. This is quite a different story when using platforms that are only able to validate identification manually.

    Step 2: Add Funds to Your eToro Trading Account

    Before you can fully submerse yourself in learning how to trade commodities on eToro – you need to add funds to your trading account. After all, you have to speculate to accumulate in this scene.

    As such, you won’t be able to make any commodity trading profits without any money in your account!

    All accounts, deposits, and withdrawals on eToro are handled in US dollars. With that said, the broker does support traders from over 140 countries. Therefore, eToro will just exchange your deposit currency to USD for you, at a small FX fee of 0.5%.

    This shouldn’t be much of a concern, considering that the platform charges nothing for the management of your account and 0% in terms of commission.

    eToro really shines when it comes to accepted payment methods. You can choose between the following options:

    • Maestro
    • MasterCard
    • Visa
    • Bank Wire
    • Neteller
    • Paypal
    • Skrill

    As most people know, bank wire transfer is safe but very slow to process. Therefore, if you are keen to get started with learning how to trade commodities on eToro right now, you are best advised to deposit using a credit/debit card or e-wallet. This way you can get started within minutes.

    Step 3: Search for a Commodity to Trade on eToro

    By following our How to Trade Commodities on eToro Guide up to this point, you have opened and funded your new broker account. Now, you can begin to trade!

    Of course, the first plan of action needs to be selecting a commodity you want to trade. To do this, you can use the eToro search facility and simply type in the commodity you are most interested in. As you type, a suggestion list appears – so just click the relevant commodity to you.

    In our example, we are searching for ‘Copper’.

    If you are yet to decide which particular commodities you would like to trade – look for ‘Trade Markets’ on the lefthand side of your account screen. Here, you can utilize the filter tool and see what catches your eye from the 45+ commodities on offer.

    This covers three commodities categories – hard metals, energies, and agriculture. See below for inspiration when thinking about how to trade commodities on eToro.

    Hard Metals

    When it comes to hard metals, think along the lines of gold and silver.  These are hard commodities that are extracted or mined.

    eToro offers access to the following hard metals, on a commission-free basis:

    • Gold
    • Silver
    • Copper
    • Aluminum
    • Platinum
    • Palladium
    • Nickel

    The majority of commodity brokers are only able to offer the likes of gold and silver. The former is undoubtedly the most traded commodity in the world. As such, gold offers high liquidity and tight spreads.

    As you can see, eToro is able to offer a good variety of metals. Albeit, it’s worth noting that such commodities are available as CFDs. This is great, as there no requirement for you to personally buy and store bars of gold!

    With that said, you will be able to invest in silver and gold too via ETFs oneToro. One such example is the ‘Gold Minors ETF VanEck Vectors’. Once again, this can be facilitated on eToro commission-free.

    Energies

    The energy markets usually include commodities like oil and natural gas, with crude oil probably being the most commonly traded globally. For those unaware, oil and natural gas will almost always be priced in USD.

    • In the US, oil tends to be priced by the WTI Benchmark
    • Globally, the main market is priced according to the Brent Crude Benchmark

    The price of oil, much like most assets, is dictated by supply and demand – as well as important global events such as political turmoil and wider oil supplies.

    The following energies are available to trade on eToro:

    • Natural Gas
    • Oil

    In terms of markets such as natural gas, you can expect higher levels of volatility than when trading oil commodities.

    Agriculture

    Agricultural products are also in high demand globally, with commodities such as wheat, soybeans, and corn up there amongst the most traded.

    When considering how to trade commodities on eToro, you can expect the see the following agricultural products:

    • Cotton
    • White Sugar
    • Cocoa
    • Wheat

    Remember, all of the above commodities will be quoted in US dollars on eToro. Furthermore, before you make a final decision, we advise heading over to the broker’s website to find your feet and check out the full list of commodities available to you.

    Step 4: Trade Commodity CFDs or Invest in Commodity ETFs

    When you’ve made a decision about which markets you might be interested in – you can then think about whether you are in the business of investing in or trading commodities on eToro.

    Crucially, investing and trading are two very different things. If you decide to trade commodities, this will invariably be done via CFDs (Contract for Differences). If, however, you want to invest – this will be done via ETFs (Exchange Traded Funds).

    See below for clarification on both options.

    Invest in Commodities on eToro

    To invest in commodities on eToro, this involves using an ETF to monitor and illustrate the price of the asset. For example, let’s say you are investing in a commodities ETF such as the ‘VanEck Vectors Gold Minors’.

    In this case, you will not personally own the physical asset. Instead, this is an indirect way to invest in your chosen commodity. This particular ETF invests in stocks of big companies that operate in materials such as gold, silver, and mining metals – tracking the NYSE Arca Gold Miners Index.

    As is clear, commodity EFTs are best suited to those who see themselves more as a ‘long-term investor’. If you prefer the idea of trading commodities – below we talk about CFDs.

    Trade Commodity CFDs on eToro

    CFDs are available at most modern online brokers these days, and eToro is no different. We’ve talked about CFDs a few times already. However to clarify, when thinking about how to trade commodities on eToro – this will be possible via CFDs.

    When trading CFDs, there is no need to worry about where to store ounces of silver or bushels of wheat. This is because you do not own the underlying asset. Instead, the CFD monitors the real-life price shifts of the underlying asset.

    For instance, if the benchmark for oil values WTI Crude Oil at $52.28 – your CFD will also be valued at $52.28. As such, if you are trading gold and that increases in price by 2% – so will your gold CFD.

    On eToro, you can trade commodity CFDs, as well as a plethora of other assets such as stocks, indices, ETFs, forex, and cryptocurrencies – all of which are commission-free.

    One of the many benefits of trading CFDs is that you are able to go long or short on the prospective asset, which we explain next. To clarify, if you are from the US, you will not be able to access CFDs on any asset, which is as per CFTC and SEC rulings. Whereas UK residents are banned from cryptocurrency CFDs only.

    Long and Short Positions Supported

    We mentioned that CFDs enable you to go long or short. Put simply, if you think the price of cocoa is going to fall, you can still make a profit from this – if you speculate correctly.

    • If you think the price of cocoa is going to rise, you can ‘go long’ by creating a buy order on eToro
    • On the contrary, if you think the price of cocoa will fall, you can ‘go short’ by creating a sell order on eToro

    We talk about how to trade commodities, in terms of placing orders on eToro, in Step 5.

    First, here is a practical example of short selling commodity CFDs to clear the mist:

    • You think that platinum is overvalued at $1,103 – meaning you believe the asset will see a fall in value.
    • With this in mind, you place a $1,000 sell order on platinum CFDs
    • Your prediction was correct – the price of platinum fell by 8% to $1014.76. –
    • As such, your platinum CFD reflects this
    • Because you went short on platinum and it fell by 8% – you made 8% in gains.
    • This means that on a stake of $1,000, you made $80

    As is clear from our example, short selling commodities is made super easy on eToro! Not only that, but you can do so without paying a cent in commissions.

    Leverage

    When contemplating how to trade commodities on eToro, you should know that you will be able to apply leverage. For those unaware, leverage is offered by brokers to enable clients to trade on ‘margin’ – which is like an indirect loan.

    On eToro, and most other platforms, leverage is shown as a multiple – for instance, x2, x5, x10, and so forth. eToro will multiply the leverage by your stake.

    So, if you were to stake $1,000 at x3 leverage – this would amount to a position of $3,000. Much like if you applied leverage of x10, that $1,000 would become $10,000.

    If you are still somewhat perplexed, take a look at an example below of how to trade commodities on eToro with leverage applied:

    • This time let’s say you are trading silver
    • The quoted price is $26.60 – however, you feel strongly that the price will rise over the next few days
    • As such, you decide to stake $1,000 on the silver trade with x5 leverage
    • You speculated correctly, as silver grew in value to $29.79
    • This represents a price increase of 12%, meaning your initial profit would equate to $120 ($1,000 x 12%)
    • But, because you applied leverage of x5 – you have multiplied your gains 5 fold. As such, your profit with leverage is instead an impressive $600.

    As you can see, leverage is a superb way to boost any profits when you time the market correctly. For instance, if you apply leverage of a more modest x2 on a $1,000 stake, you would be trading with $2,000 – which is still a 50% margin.

    However, this means that had the trade gone the other way and your position fell in value by 50%, you would lose your stake. This is because eToro would be forced to liquid the position. Ultimately, leverage should be used with caution as it can magnify your gains as well as losses, with just one wrong decision.

    • Clients in the UK, Australia, and parts of Europe will be capped on the amount of leverage they can apply on eToro.
    • The rules state that the leverage limits are x20 on gold, and x10 on all other commodities.

    Leverage restrictions depend on what part of the world you reside in and whether you are a retail or pro trader.  eToro makes this information readily available, so if you aren’t sure what you can access – head over to the website for more information.

    Overnight Financing Fees on eToro

    With CFDs and leverage come overnight financing fees. For those unaware, any position left open overnight will be charged this daily fee – otherwise called a ‘swap fee’. This is due to the fact such contacts are leveraged instruments.

    It’s important to be aware that even if you decide not to bother boosting your trade with leverage, you will still be liable for overnight financing fees.

    Just to give you some indication of when this fee is actioned on eToro:

    • 17:00 New York, USA time
    • 22:00 UK, Greenwich Mean Time
    • 23:00 Brussels, Belgium time
    • 09:00 the next morning Canberra ACT, Australia time

    Furthermore, the amount charged will depend on various factors like:

    • Your stake size
    • Which asset you are trading
    • The amount of leverage applied
    • Whether your trade is still open on a weekend (weekend positions sometimes come with a slightly higher cost)

    Let’s take a look at a couple of examples of overnight financing fees. This should help you understand all elements of how to trade commodities on eToro:

    • If you are trading natural gas CFDs with leverage of x2 and a $500 stake, you will pay a daily fee of $0.19. Over a weekend this fee is $0.56.
    • If you are trading natural gas CFDs with leverage of x10 and a $1,000 stake, you will pay a daily fee of $1.86. Over a weekend this fee is $5.59.

    As is clear from the above, the fee charged for keeping a position overnight changes according to the stake value and leverage. You will see the chargeable fee clearly displayed at the bottom of the eToro trading order box when entering value and leverage.

    Of course, swap fees can be avoided by simply investing in commodities via ETFs!

    Invest or Trade? Quick Recap

    The chances are by this point you have a clear idea of whether you see yourself investing in or buying commodities. For those who are still undecided, see a summary below:

    • If you wish to invest in gold, for instance, you will be able to do so via a gold ETF on eToro. This is commission-free, so you can keep your long-term gold position open for as long as you wish.
    • If you want to be able to apply leverage to your trades and short sell, you can do so via commodity CFDs on eToro. This will, however, attract overnight financing fees.

    As you can see from the above, whether you decide to invest or trade commodities on eToro is heavily dependent on whether you see yourself as a short-term or long-term trader.

    Step 5: Set up a Commodity Trading Order

    In this section of our How to Trade Commodities on eToro Guide, we are going to walk you through how to set up a trading order on the platform.

    When you have selected your chosen asset, click ‘Trade’ and an order box will appear on the screen.

    Take a look below at the most commonly utilized orders, all of which are invaluable when it comes to trading commodities on eToro.

    Buy or Sell Order

    The most basic of all orders is the buy and sell order. You will always enter the market by starting with one of these orders. As we noted, if you believe the asset will rise in value – a buy order is placed. If you believe it will fall in value – a sell order is placed.

    You will notice that the default order in the box is ‘buy’.  If you want to short sell the commodity – make sure to select ‘sell’ at the top of the order box. As you can see, in our example, we are looking to trade silver CFDs.

    Set Rate – Market Order or Limit Order

    The next step when going through the motions of how to trade commodities on eToro is to decide how to enter the market. You must choose between a ‘market order’ and a ‘limit order’ for this purpose.

    Market Order

    So what is a market order? A market order tells eToro that you want your commodity trade executed instantly, at the current market price. There will be a slight difference between the value you see when confirming your order, and the value you get when your order goes through.

    For instance, you might trade wheat at $648.50, but the price you get is $648.48. This is completely unavoidable and is a simple case of supply and demand, and ever-changing commodity prices.

    If the particular market you are interested in happens to be closed upon placing your order, eToro will execute it as soon as the market opens

    You may notice that on eToro the market order is automatically selected for you. Ergo, if you instead want a limit order, you will need to adjust this yourself – more on that next.

    Limit Order

    If you are a medium-to-long-term investor and are looking to hold onto your commodities for months or years at a time, then you will most likely use a market order.

    Alternatively, if you are planning to trade your chosen commodities on more of a short-term basis – then you will be looking to place a limit order when entering the market. This is because you will be looking to make modest but frequent profits and thus – will want to specify the price that the order is executed at.

    In other words, a limit order tells eToro what specific price you wish to enter the market.

    Take a look at an example below:

    • For continuity, let’s say you are trading wheat at $648.50 on eToro
    • However, you are not interested in entering the market until Wheat reaches $700.00
    • As such, you create a limit order at $700.00
    • This means that your wheat position will not be executed by eToro until wheat hits a price of $700.00
    • Your limit order will stay as it is until the price target is reached, or you cancel your order manually

    As you can see from the above, limit orders enable you to be very specific when it comes to the price at which a trade is actioned. Don’t forget, if you want a limit order instead of a market order, you must select it yourself.

    To do this, simply click ‘Rate’ next to ‘At Market’. Then, enter the price you wish for your order to be executed at.

    Amount

    Of course, you are going to need to enter an amount, meaning a stake. Think about how much you are willing to risk on your eToro commodity trade and enter an amount in the relevant field.

    The good news is that eToro allows you to trade commodities from a stake of just $50 upwards. This is great for those of you that wish to trade commodities but have limited capital.

    Stop-Loss

    The stop-loss order is invaluable – largely because you are able to limit the amount of money you will lose from any trade.

    For instance, let’s say you are long on platinum – meaning you think the price will rise. But, you aren’t willing to lose more than 3% of your initial stake. As such, you will be able to create a stop-loss order set at 3% lower than the value of your position.

    • Again, a stop-loss order must be manually added yourself, as it is not a default setting
    • Click ‘Stop-Loss’ and enter the price you wish for the orders to be actioned at
    • You will not be able to enter a percentage per-say. Instead, the percentage will shift as you enter your monetary amount.

    With that said, you can calculate the stop-loss price yourself very easily:

    • Let’s say you are trading platinum which is priced at $1,085.20
    • You are not willing to lose more than 4%
    • If you elect to ‘go long’ on platinum, meaning you believe the price will rise – you can set a stop-loss to 4% under $1,085.20. This equates to a stop-loss price of $1,041.79
    • If you elect to ‘go short’ on platinum, meaning you believe the price will fall – you can set a stop-loss to 4% above $1,085.20. This equates to a stop-loss of $1,128.60

    If platinum reaches the price you set your stop-loss to – eToro will close your position immediately. As such, you never have to worry about losing more than your trading budget allows. In this scenario, that would be capped to 4%.

    Take-Profit

    Take-profit and stop-loss orders are very similar, as they both allow you to be price-specific when placing orders on eToro. The main contrast is that stop-loss orders limit your losses, whereas take profit orders lock in profits.

    Let’s say you want to make gains of 9% on your platinum trade, and the asset is currently valued at $1,092.80.

    This is how that take-profit order would look on eToro:

    • Imagine you are going long on platinum, meaning you believe the price will rise. In this case, you place a take-profit order at 9% above $1,092.80. This makes your take-profit price $1,191.15.
    • Imagine you are going short on platinum, meaning you believe the price will fall. In this case, you place a take-profit order at 9% below $1,092.80. This makes your take-profit price $994.44

    Setting up this trade is easy at eToro. Simply hit ‘Take Profit’ and enter the price you want. We recommend adding both take-profit and stop-loss orders to each and every commodity trade.

    After all, these orders make it super easy to keep an eye on your trading goals, whilst giving you more control over your entry and exit price. Another benefit is that you don’t need to time the market yourself, as these orders are automatically executed by eToro.

    Confirm Commodity Trading Order

    Now you can check all of the information you have entered and confirm your choices by clicking ‘Open Trade’.

    If the respective market is closed, your order will be actioned by eToro when the market opens.

    Step 6: Withdrawing Your Profits From eToro

    The whole point of trading commodities on eToro is to make money. So, it goes without saying that you will need to withdraw your profits at some point down the line.

    eToro will send your gains back to the initial funding method used to deposit. You must first make sure you have completed the sign-up process – including uploading a photo ID, and proof of address.

    It’s important to note that the minimum withdrawal amount stipulated on eToro is $30. Furthermore, if you are not a US client, you will need to pay a small withdrawal fee of $5.

    We mentioned that your gains will be transferred to your initial deposit method. This is per anti-money laundering rules. For example, say you used Visa to fund your account with $1,000 originally. Later on, you are looking to withdraw $1,200. In this instance, at least $1,000 needs to be sent to the same Visa card.

    The Verdict: How to Trade Commodities on eToro

    We have talked about every aspect of how to trade commodities on eToro – from how to open an account to how to choose a market. Not only that, but we’ve walked you through some crucial order types to include in your entry and exit strategy. Stop-loss and take-profit orders particularly are invaluable for risk limitation.

    Whether you decide to invest in commodities via ETFs or trade CFDs, you can look forward to commission-free trading on eToro. Moreover, this impressive broker serves over 17 million clients and is regulated by three of the most respected bodies in the industry – the FCA, ASIC, and CySEC.

    Reading guides like ours and conducting your own fundamental and technical analysis will only help you in making informed and educated decisions.

    Still a complete beginner in the world of commodity trading? If so, why not utilize eToro popular Copy Trader feature? This enables you to trade commodities passively and invest in a pro trader to copy like-for-like. The platform also offers all clients a free demo account packed with $100,000 in paper funds.

     

    Eightcap - Regulated Platform With Tight Spreads

    Our Rating

    • Minimum deposit of just $250
    • 100% commission-free platform with tight spreads
    • Fee-free payments via debit/credit cards and e-wallets
    • Thousands of CFD markets including Forex, Shares, Commodities, and Cryptocurrencies
    Start your journey towards reaching all your financial goals right here.

     

    FAQs

    What commodities can be traded on eToro?

    eToro has over 45 commodities available, including metals such as gold, silver, and platinum, and energies like natural gas and crude oil. The broker also offers agricultural commodities such as wheat, cotton, and sugar.

    What are the fees when trading commodities on eToro?

    eToro charges clients 0% commission. This means you are able to trade commodities without paying a cent in trading fees.

    What is the minimum commodities trade on eToro?

    The minimum commodities trade on eToro is a very reasonable $50.

    Does eToro offer leverage on commodities?

    Yes. eToro will offer you up to x20 leverage on gold trades, and x10 for all other commodities. This means you are able to trade with 20 times or 10 times the amount your account allows.

    How can I short-sell commodities?

    To short-sell commodities, simply place a sell order on eToro - if you believe the price of the asset will fall.