Commodities Trade - Basics
Oil and gas are the two most popular commodities. They trade in high volumes around the clock, offering online traders many opportunities. Whether it is American crude oil (WTI), Brent oil (Brent) or natural gas (NATGAS), energies are quoted in US dollars.
This means that when trading energy CFDs, the US dollar exchange rate is a key factor to watch out for. Our Commodity CFDs are offered with “buy” and “sell” prices. The difference between prices is known as the "spread".
If you think the price of WTI oil will rise, you buy 1 lot of WTI at $ 54.17, which equates to a $ 100 profit for every 0.01 price movement if the market moves in the direction you predicted.
Who Trades in Goods?
Commodities are natural resources such as oil, gas, coffee, and soybeans. Producers and buyers exchange goods through futures contracts on exchanges around the world. When the futures contract expires, these traders exchange the actual commodity. The second type of traders involved in commodity markets are speculators, that is, traders who buy and sell commodities for the purpose of making a profit.
The two best-selling commodities are oil and gas, also known as commodities. Among these two, crude oil is the most important because of its widespread use in transportation and production. The price of oil is such a powerful global indicator that it can also dominate politics, as countries with high oil production tend to have a significant impact on the global financial system.
Why Trade Goods?
Whether you are a trader or not, oil and gas prices affect all of us every day. In the past, investing in commodities was limited to people with significant capital, time and experience. Access to commodity markets is now available to non-professionals as well, allowing online traders to benefit from short-term and long-term price fluctuations.
Energy markets have their own unique characteristics, which is why oil and gas trading is a popular choice among forex traders looking to diversify their trading. Known for its high liquidity, buying and selling oil and gas is available 23 hours a day throughout the trading week.
What affects the prices of goods?
Unlike Forex, where the value of a currency is closely tied to the efficiency of the economic zone that uses it, commodity prices are highly dependent on supply and demand. Here's what you need to know to track the key determinants of supply and demand in the commodities sector.
US dollar price
Since commodity prices are set in US dollars, fluctuations in the US dollar exchange rate directly affect the trading prices of commodities such as oil, gas, coffee, and soybeans.
Extreme weather conditions such as hurricanes, tsunamis and earthquakes can have a strong impact on commodity prices.
Geopolitical forces have a direct impact on the energy sector, which can be seen as a risk and an opportunity. International diplomacy, civil unrest and fluctuating exchange rates can significantly increase volatility in oil and gas markets.
OPEC production targets
When it comes to oil trading, OPEC is a key organization to watch out for. The Organization of Petroleum Exporting Countries includes 14 countries. OPEC sets production targets for its members to regulate supply. As practice shows, with a decrease in production plans, the price of oil rises.
Benefits of trading in goods
Commodities trading has become one of the most popular ways to diversify a portfolio, especially during bearish stock markets, as commodities tend to move in the opposite direction of stocks. Below are other reasons why traders choose to trade commodities online:
On the energy side, oil and gas markets are available 24 hours a day, with an hour off during the trading week. All you need to participate is a trading account with a trusted broker.
High liquidity market
The commodity markets are actively traded in large volumes by various participants around the world, offering several trading opportunities to both short and long term traders.
Long or short positions
Unlike traditional investing, which involves buying and holding in the hope of a price increase, you can profit from both upward and downward price movements by entering a long or short position. You can start trading the very volatile commodity markets with a starting capital of just £ 250.