Commodities trading can be an important way to diversify a portfolio beyond traditional markets. Commodities are the raw materials that drive the economy, from metals and fossil fuels to grains and livestock. Here at GO Markets we currently offer hard commodities including Spot Gold, Spot Silver, Spot WTI Crude Oil and Spot Brent Crude Oil to be traded as CFDs.
*The effect of leverage is that both gains and losses are magnified. You should only trade if you can afford to carry these risks.
Commodities are usually traded in exchanges that specialise in these products, like the New York Mercantile Exchange (NYMEX) or the London Metal Exchange.
Commodities are traded using standard size lots – e.g. 1,000 barrels of crude oil.
With Commodities trading, you are actually trading it as a CFD, which means you are only trading the price movement and not the actual commodity.
This gives you the flexibility to trade a fraction of the standard contract. So, instead of trading 1,000 barrels of oil, you can trade a smaller lot of 100 barrels. This is ideal particularly if you are just starting out with commodities trading, as you can set aside a smaller amount of your trading capital to get exposure in this liquid market.
Below is the full range of commodity CFDs you can trade via our MetaTrader 4 trading platforms:
|Instrument||Symbol||Spread||Lot Size||Trading Hours (GMT+2)|
|Spot WTI Crude Oil||USO/USD||Variable||100 Barrels||01:00-24:00|
|Spot Brent Crude Oil||UKO/USD||Variable||100 Barrels||03:00-24:00|
There are many factors which make the commodity market highly volatile. Some of the key ones are:
The price is dependent on the supply and demand for each commodity. As the supply and demand fluctuates, the price will also change. Hypothetically, commodity price increases with demand. As demand increases for a commodity, the price will also increase and vice versa.
Since commodities are usually priced in USD, as the value of the USD falls, commodities will become more expensive for traders who use that currency to pay for them. For example, let’s say that the USD experiences a sharp rise against a basket of major currencies – commodities such as crude oil, energies, precious metals, and a variety of agricultural products will usually see a fall in price in response. It’s worthwhile to note, however, that markets do not always operate in a completely uniform manner, and further external factors should also be considered when trading.
Most commodities are susceptible to political uncertainty. Unfortunately, a majority of the world’s most commonly traded commodities are produced in unstable regions such as the Middle East and Africa, who have recently been experiencing a number of regional crises. For example, the Middle East is the largest producer of crude oil, but as western countries impose sanctions on various countries within the Middle East, Brent and WTI crude oil prices can become heavily influenced.
The economic prosperity of a country similarly affects the price of a commodity. This is because economic prosperity determines the purchasing power of a given population, with the effect becoming more obvious if the country in question is a major producer or user of that commodity. A good case study is Venezuela: although a major producer of oil, the government has caused significant damage to the country’s oil industry through lack of investment, corruption and cash shortages. This, in turn, has crippled the economy and resulted in hyperinflation. Moreover, the economic sanctions imposed on Venezuela have further constricted oil production, exports, and revenues in the currency.
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