Commodity trading in the forex market involves investing in physical products called commodities such as gold, grains, and oil.
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This type of trading only consists of investing in assets such as gold and oil and not a company’s shares as opposed to stock trading.
However, commodity traders trade the raw materials used in the production of finished goods such as grains and copper.
4
Payment methods
Trading platforms
Regulated by
Support
Min.Deposit
Leverage max
Currency Pairs
Classification
Mobile App
Min.Deposit
$100
Spread min.
Variables pips
Leverage max
100
Currency Pairs
40
Trading platforms
Funding Methods
Regulated by
FCA
What you can trade
Forex
Indices
Actions
Cryptocurrencies
Raw Materials
Average spread
EUR/GBP
-
EUR/USD
-
EUR/JPY
0.3
EUR/CHF
0.2
GBP/USD
0.0
GBP/JPY
0.1
GBP/CHF
0.3
USD/JPY
0.0
USD/CHF
0.2
CHF/JPY
0.3
Additional Fee
Continuous rate
Variables
Conversión
Variables pips
Regulation
Yes
FCA
No
CYSEC
No
ASIC
No
CFTC
No
NFA
No
BAFIN
No
CMA
No
SCB
No
DFSA
No
CBFSAI
No
BVIFSC
No
FSCA
No
FSA
No
FFAJ
No
ADGM
No
FRSA
71% of retail investor accounts lose money when trading CFDs with this provider.
Min.Deposit
$100
Spread min.
- pips
Leverage max
400
Currency Pairs
50
Trading platforms
Funding Methods
Regulated by
CYSECASICCBFSAIBVIFSCFSCAFSAFFAJADGMFRSA
What you can trade
Forex
Indices
Actions
Cryptocurrencies
Raw Materials
Etfs
Average spread
EUR/GBP
1
EUR/USD
0.9
EUR/JPY
1
EUR/CHF
1
GBP/USD
1
GBP/JPY
1
GBP/CHF
1
USD/JPY
1
USD/CHF
1
CHF/JPY
1
Additional Fee
Continuous rate
-
Conversión
- pips
Regulation
No
FCA
Yes
CYSEC
Yes
ASIC
No
CFTC
No
NFA
No
BAFIN
No
CMA
No
SCB
No
DFSA
Yes
CBFSAI
Yes
BVIFSC
Yes
FSCA
Yes
FSA
Yes
FFAJ
Yes
ADGM
Yes
FRSA
71% of retail investor accounts lose money when trading CFDs with this provider.
Min.Deposit
$10
Spread min.
- pips
Leverage max
10
Currency Pairs
60
Trading platforms
Funding Methods
What you can trade
Forex
Indices
Cryptocurrencies
Average spread
EUR/GBP
1
EUR/USD
1
EUR/JPY
1
EUR/CHF
1
GBP/USD
1
GBP/JPY
1
GBP/CHF
1
USD/JPY
1
USD/CHF
1
CHF/JPY
1
Additional Fee
Continuous rate
-
Conversión
- pips
Regulation
No
FCA
No
CYSEC
No
ASIC
No
CFTC
No
NFA
No
BAFIN
No
CMA
No
SCB
No
DFSA
No
CBFSAI
No
BVIFSC
No
FSCA
No
FSA
No
FFAJ
No
ADGM
No
FRSA
Your capital is at risk.
Min.Deposit
$50
Spread min.
- pips
Leverage max
500
Currency Pairs
40
Trading platforms
Funding Methods
What you can trade
Forex
Indices
Actions
Raw Materials
Average spread
EUR/GBP
-
EUR/USD
-
EUR/JPY
-
EUR/CHF
-
GBP/USD
-
GBP/JPY
-
GBP/CHF
-
USD/JPY
-
USD/CHF
-
CHF/JPY
-
Additional Fee
Continuous rate
-
Conversión
- pips
Regulation
No
FCA
No
CYSEC
No
ASIC
No
CFTC
No
NFA
No
BAFIN
No
CMA
No
SCB
No
DFSA
No
CBFSAI
No
BVIFSC
No
FSCA
No
FSA
No
FFAJ
No
ADGM
No
FRSA
71% of retail investor accounts lose money when trading CFDs with this provider.
This set of traders ensure that products produced by manufacturing industries get to the consumers, thus providing the best price for producers.
Community traders get their profit when the volume of transactions is quite high.
Back in the days, commodity trading used to be an offline thing. But thanks to the advancement in technology, brokers can get their customers to trade commodities online.
There are different tools that give lots of information to brokers on any industry to ensure they trade at the right time.
Just like every other area in forex trading, investing in commodities has its pros and cons.
The Pros of Online Commodity Trading
- Diversification
Commodity trading can help diversify a portfolio. The profits gotten from commodity have decreased or negative correlations with the benefit obtained from different asset forms.
This means that if there is a decrease in bonds and stocks; definitely, commodities will increase.
Additionally, the factors that affect bonds and stocks don’t affect commodities.
It is essential also to know that commodities perform in diverse ways in different economic conditions: The value of stocks and bonds may decrease during a bad financial situation, but the worth of gold may rise due to the increase in its demand.
Therefore, commodity trading ensures a diversified portfolio and increases risk-adjusted returns.
- Safety Against Inflation
Inflation has a different effect on commodities than bonds and stocks. When inflation comes up, bonds and stocks decrease, but commodities still increase.
This is because when the price of goods increases, the value of commodities to produce these goods also moves up. With that in mind, inflation doesn’t affect commodity trading.
- Liquidity
Commodity futures are highly liquid than investing in real estate and the likes. You can easily trade commodity futures at any time and liquidate your position.
The Cons of Online Commodity Trading
- Highly Volatile
Even though commodity futures are high in liquidity, they can be volatile too. It is essential to note that the futures market is unpredictable, and direct investments can pose a considerable risk, especially for inexperienced commodity traders.
- Speculative risk
Commodity trading also exposes a trader to uncertain risks. As a commodity trader, you aren’t always sure if you would make lots of profit or loss from an investment.
Hence, highly volatile commodities have a high speculative risk since any little change can determine profit and loss.
- Geographical risks
Because natural resources are found in different places worldwide ensures that traders would have to cope with governments with these resources.
To extract these natural resources in a given country, you have to obtain licenses, work with native companies, and deal with geographical and economic concerns.
Nevertheless, one thing every commodity trader has to know is that they also need to be aware of political decisions in that country, as it can change and affect their trades.
Additionally, the need to also keep tabs on the climate condition of the place is needful.
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End Notes
Online trading has an extensive list of advantages and disadvantages, well eclipsing the topics covered by this article. While the digital markets of today provide a wealth of opportunities, they also pose many unique risks. It is up to the individual to decide if the pros outweigh the cons and if online trading is an appropriate course of action given capital and risk considerations.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites are provided as general market commentary and do not constitute investment advice. Learn 2 Trade 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.