Diversify With Commodity Trading

Commodities are raw materials or agricultural products, which tend to be used as the “building blocks” for other goods and services, although can also be used as goods themselves. Therefore, the word “commodity” can be used to refer to a wide range of goods, such as sugar, coffee, gold, silver and crude oil.

These basic goods tend to be interchangeable with other commodities of the same type and quality, a characteristic known as fungibility.In other words, there is little differentiation between commodities of the same type regardless of its producer, provided they are of the same quality. For example, a bag of sugar is essentially the same product, whether it is produced in Brazil or India.

Physical commodities can be bought and sold on commodity exchanges, but they can also be traded using financial derivative products, such as Contracts for Difference (CFDs).

Contracts for Difference (CFDs) are a financial derivative product which can be used to speculate on the prices of a wide variety of assets, including commodities.

One of the problems associated with buying and selling physical commodities is the fact that, to do so, you will need to take ownership of, or deliver, the physical good. Naturally, this presents certain logistical challenges, such as transportation and storage.

On the other hand, commodity CFDs allow traders and investors to speculate on the price of commodities without ever having to take ownership of, or deliver, the underlying commodity.Instead, traders and investors enter into a contract agreeing to exchange the difference in price of a commodity between when the contract is opened and when it is voluntarily closed by the trader or investor, the difference being settled in cash.Furthermore, CFDs benefit from the use of leverage, meaning that traders and investors can access larger position sizes with a lower deposit.
Traders should know that commodity CFDs are high risk financial instruments and that trading may involve significant risks.

With commodity CFDs, traders and investors can build their strategy based on both rising and falling prices in the commodity of their choice. At Admirals, we offer the ability to trade commodity CFDs on many of the world’s most popular commodities, including crude oil, natural gas, gold and many others!

In addition to commodities, with Admirals, traders and investors also have the option of trading thousands of other CFDs on a range of assets, including cryptocurrencies, Forex, stocks and many more.Simply register for a Trade.MT5 account in order to start trading commodity CFDs.

The best commodities to trade will depend largely on the trader in question, in particular their trading style and their knowledge of commodities.

As with any freely traded asset, the price of a commodity is determined by the balance of global supply and demand, changes in either of which will inevitably result in a change in the price of the commodity in question.Therefore, traders and investors may prefer to trade commodities that they are familiar with in terms of financial knowledge as this can help anticipate changes in supply and demand, and, consequently, price.

Like CFDs, futures contracts are a type of derivative product, although they work in a very different way. A commodity futures contract is a binding agreement, in which two parties agree to exchange an underlying commodity at a predetermined price on a fixed date in the future.

Commodity futures can be bought and sold on futures exchanges, meaning that, like CFDs, traders and investors can use them to speculate on the prices of commodities without taking ownership of, or delivering, the underlying asset.Therefore, traders and investors may prefer to trade commodities that they are familiar with in terms of financial knowledge as this can help anticipate changes in supply and demand, and, consequently, price.

At Admirals, as well as offering CFDs on a wide range of commodities, we also offer the ability to trade CFDs on a number of commodity futures contracts.