Products like soybeans and copper might not sound as exciting as Apple Inc stocks or Bitcoin when it comes to financial trading, but it’s worth remembering that the global commodity trading market is one of the cornerstones of modern finance. What are commodities in finance? Basically, any raw material or agricultural product that is produced, but not manufactured. For example, aluminium would be classed as a commodity, whereas a car would not. Popular commodities that you can trade at ETFinance include gold, silver, crude oil, natural gas, sugar and cocoa.
As with many terms in finance, there is sometimes a bit of disagreement over the definition of a commodity. For instance, it has recently expanded to include financial products like currencies and indices. However, for our purposes of explaining commodity trading here we will stick to the tradition definition. Normally, commodities fall into these four categories:
While many industries will be involved in purchasing futures contracts – consider how the airline industry might set up huge deals to buy gasoline at future prices – trading commodities online effectively involves speculating, with traders using derivatives like CFDs (contract for difference).
This will allow you to trade commodities like gold, oil or sugar, but not require you to buy the commodity outright. Essentially, you will make a prediction on whether the price of the commodity will rise (go long) or fall (go short), and a contract is created between you and the broker to pay the difference. Normally, a broker like ETFinance will offer you leverage – a means to trade multiple times your investment – to trade popular commodities online.
There are many facets to commodity trading, and it’s worth remembering that commodities are interwoven into all aspects of economics – think of how the price of oil might impact inflation due its use in all types of industry. At ETFinance, you can find all the information and tools to help you trade commodities.
Educational resources like tutorials and webinars are offered to help you get up to speed, and professional traders can find the latest insights and analysis with ease. Generous leverage is offered to help you amplify your position in your trade, and you can also discover CFD trading on a wide variety of other assets like stocks, indices and forex at ETFinance.