How to Begin Trading Commodities Using CFDs?


How to Begin Trading Commodities Using CFDs?

CFDs are a universal investing tool, and you can benefit from commodity trading by using them. We’ll tell you how.

CFD + Commodities — Superb Duo

CFD trading commodities is one of the most popular ways to invest in contracts for difference. Even though it’s called “CFD commodity trading,” this title is a bit misleading.

CFDs don’t allow you to directly invest in a certain commodity: crude oil, natural gas, orange juice, gold, and so forth. Instead, you sort of make a “bet” when you buy a CFD. According to your prognosis, you can choose one of two options: whether the commodity will grow or decrease in price in the future.

For example, you know that the cotton harvest in the Chinese region of Xinjiang wasn’t that good this year due to harsh climatic conditions. Knowing that info, you can buy a CFD aimed at the fact that cotton prices will rise.

One of the biggest advantages here is that you can actually earn money from the commodity price fluctuations without having to pay extra fees. Traders who invest in them directly have to cover the storage, shipping commissions, and so on.

By the way, CFD traders aren’t limited in terms of the portfolio: you can trade pretty much the same commodities that more “traditional” investors have at their disposal.

The list includes:

  • Silver.
  • Palm oil.
  • Palladium.
  • Molybdenum.
  • Soybean meal.
  • Random length lumber.
  • Rough rice, and so forth.

As you can see, the repertoire is the same as the one you can find on NASDAQ, NY Mercantile Exchange, and so on.

Where to Begin?

For starters, you need a broker who will help you buy CFDs. You have full freedom to choose which commodities you will invest in. But knowing certain markets is crucial.

First, consult your broker on which commodities are the most promising at the moment. It depends on various factors: the season of the year, growing demand for some type of products, holidays, pandemics, etc.

It’s best if you do your own analysis of the market using fundamental and technical methods. The former method is about analyzing news, global trends, the claims made by companies and CEOs, and so on.

For example, if Hyundai Heavy Industries makes an announcement that they are preparing to build a new cargo ship, this might naturally increase steel and aluminum prices.

At the same time, technical analysis is bot-driven. A special AI algorithm analyzes the trading history over a given period of time: let’s say, two quarters ago.

Upon learning the data, the bot will know which patterns and price fluctuations occur when a certain commodity is being traded. This data can help minimize losses as well as go for bigger profits.

The best part is that the CFD market has a low entry point. You’re basically investing a fracture of the total value of a given commodity. But your profits can handsomely exceed your initial investment.

If you think that it sounds like a fraud, don’t get too judgy. CFDs exploit leverage, which is basically a borrowed capital. But remember: you need to manage your risks: leverage can amplify both your profits and losses.

Commodity CFD — A Sure Deal

Follow this quick guide, study the market, and hurry up to earn money from the commodity market. With this universal trading tool, you can make your capital from the commodity price fluctuations without the need to pay extra fees.