How to start trading Commodities with Capital.com?

To start trading Commodities with Capital.com, Open Capital.com CFD Account and log in to the Capital.com Official Website.

Then you need to make a deposit to your account before starting trading Commodities.

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What is commodity trading? Why is it so important?

Commodities are the oldest form of financial instruments, referred to as commodities in the trading market. The commodity market is almost as old as human civilization. Historical evidence indicates that rice may be the first commodity that appeared about 6000 years ago. During the Sumerian civilization (4,500 BC), people used pottery coins as currency to buy livestock.

Today, commodity trade forms the foundation of the global trade ecosystem. With the advent of online commodity trading, retail traders can also use relatively little capital to enter the global commodity market.

Commodities have become a popular means of inflation hedging and portfolio diversification. For most traders and investors, commodity trading is the preferred way to protect funds and reduce the overall risk of their investment portfolio.

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What are the main commodities?

Generally speaking, bulk commodities can be divided into four major categories:

Agricultural products
including edible crops (cocoa, cotton, corn, coffee, etc.), livestock (live pigs, live cattle, etc.) and cash crops (timber, woods, etc.).
Energy commodities
including natural gas, crude oil, petroleum, coal, uranium, ethanol, electricity, etc.
Metal commodities
including base metals (such as iron ore, zinc, aluminum, nickel, steel) and precious metals (such as gold, silver, palladium, platinum).
Environmental products
including renewable energy certificates, carbon emissions and white certificates.

Some people believe that “cryptocurrency”, a unique and extremely popular asset class, can also be called a commodity. Although the Swiss Financial Market Supervisory Authority (FINMA) and the U.S. Securities and Exchange Commission (SEC) tend to treat cryptocurrencies as stock analogs, there are still many people who think it is more appropriate to use actual commodities as an analogy.

In theory, Bitcoin is called “digital gold”, and many cryptocurrencies have been “mined”. At its core, cryptocurrency is not controlled by outsiders like commodities, and its value is determined by market factors. In addition, cryptocurrency can also be used for commodity trading and speculative trading. The following are currently popular cryptocurrencies:

Cryptocurrencies
including Bitcoin, Litecoin, Ethereum, Ripple, Monero, etc.

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Why choose commodity trading?

The main reasons for choosing commodity trading are as follows:

  • Diversity – Due to the lack of direct correlation between commodities and other assets, commodities in equity-only portfolios will reduce volatility.
  • The physical value of safe haven commodities is stable, so they can act as a safe haven for assets in times of global economic turmoil and market imbalances.
  • The intrinsic value of inflation-hedging commodities is independent of currency. Therefore, even if the currency plummets during inflation, the value of the commodity remains stable.
  • Speculative commodity prices – Commodities are highly volatile, and prices fluctuate greatly. Trading commodity CFDs is a trading method that uses price fluctuations to make profits.

Commodity markets occasionally have high volatility, and tradable instruments range from derivatives such as futures and CFDs to stocks of commodity production companies, which are complex and diverse. Therefore, you need to carefully consider before choosing commodity trading.

For commodities, the chance of winning a lot of profits is closely related to the risk of huge losses. Predicting commodity prices can be a very challenging thing, because factors such as weather, political turmoil, labor strikes and other factors may cause sudden price changes. Unlike stocks, commodities have almost no basic financial indicators, such as price-earnings ratios and interest rates.

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How to trade commodity CFDs?

Commodity CFDs are one of the most popular and simplest commodity trading methods.

A contract for difference (CFD) is a contract between a trader and a broker whose purpose is to profit from the difference between the opening and closing prices.

Investing in commodity CFDs saves you from the storage and additional expenditures caused by physical delivery. In addition, using CFDs to trade commodities also supports long and short markets without having to deal with traditional commodity exchanges, such as the Chicago Mercantile Exchange (CME), Intercontinental Exchange (ICE), and New York Mercantile Exchange (NYMEX).

CFDs also provide you with the opportunity to trade commodities in both directions. Whether you are bullish or bearish on commodity prices, you can use price movements to make investment profits.

In addition, commodity transactions through CFDs are usually commission-free. Brokers earn a small profit from the price difference, and traders profit from the overall price change.

Another advantage is that CFDs are leveraged products. To give a simple example, Capital.com sets a margin of 10% (the specific amount varies with commodities and brokers), you only need to deposit 10% of the total amount of the intended transaction as margin, and the rest of the amount is by the broker, that is Capital.com to pay. If you plan to trade a commodity CFD valued at US$1,000 on Capital.com with a guaranteed amount of 10%, then you only need to top up US$100 to open a position.

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Why choose Capital.com for commodity CFD trading?

Advanced artificial intelligence technology: Facebook-style news information flow provides users with personalized and rich information. When a trader makes a biased trading decision, the smart news stream will display a series of information to help the trader understand the trading blind spots and identify the trading bias. This neural network can optimize your commodity investment strategy by analyzing in-app activities and recommending videos, articles and news.

Margin trading:
On the Capital.com trading platform, you can freely trade commodity CFDs and other popular commodity categories, and you only need to invest a small amount of initial capital.
CFD trading:
Trading CFDs allows you to easily choose your favorite products without buying the underlying assets, as long as you speculate on the rise and fall of asset prices. In addition to supporting all traditional market strategies, CFDs can also support short markets. While CFD investors use short and long positions to profit from market trends, they can use stop orders and limit orders to set up capital protection for their investments.
Comprehensive transaction analysis:
Traders can create personalized market analysis on the Capital.com web trading platform and use technical indicators to judge market trends. Real-time market dynamics, various charts, and multi-channel access platforms: web, iOS and Android.
Security:
Capital.com has always been committed to providing security. Register with FCA and CySEC, fulfill all regulations, and make user data security the top priority. User funds are stored separately, safe and secure, and the platform supports all-weather cash withdrawal services.

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The world’s top five commodity exchanges

The emergence of online trading has had a huge impact on the commodity futures market, and physical trading floors have been replaced by electronic trading platforms. Today, millions of people around the world have free access to commodity futures exchanges around the world.

Exchange Established Introduction
Chicago Mercantile Exchange (CME) 1898 The American Commodity Derivatives Exchange provides the most comprehensive range of futures and options contracts. At the beginning of the establishment of the exchange is a dairy products exchange-Chicago Butter and Eggs.
Chicago Board of Trade (CBOT) 1848 The oldest futures and options exchange in the world. Since 2007, the exchange has operated as a subsidiary of CME Group.
New York Mercantile Exchange (NYMEX) 1882 The world’s largest physical commodity exchange. In 2008, NYMEX was acquired by CME Group, which also owns the world’s leading metal exchange-the New York Metal Exchange (COMEX).
Intercontinental Exchange (ICE) 2000’s Starting from the energy market, ICE is now an online exchange for global commodities and over-the-counter products.
London Metal Exchange (LME) 1877 The British exchange mainly provides basic metal futures and options trading.

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Factors influencing commodity prices

Throughout the ages, the factors affecting the price of each commodity have been different. However, the following factors have always played an important role in the trend of commodity prices.

The needs of emerging markets.
Fast-growing economies (such as China and India) have an increasing demand for raw materials and basic commodities, mainly in terms of food supply, necessary infrastructure, and fuel for households and factories. Demand in emerging markets has the greatest impact on commodity prices.
Supply.
Sufficient or tight supply of goods can also cause large price fluctuations. Environmental, labor, and political issues in major producing countries may affect the supply of goods, leading to price changes.
US dollars.
As the world’s reserve currency, the U.S. dollar can also affect the trend of commodity prices. When the U.S. dollar appreciates, the U.S. dollar received by commodity sellers decreases, and vice versa.
Substitute goods.
When the price of a product rises, buyers tend to look for cheaper alternatives. For example, in different industrial applications, people usually choose cheaper aluminum instead of copper.
Weather.
Many commodities are highly dependent on weather conditions. For example, severe drought or excessive rainfall will destroy crop supplies; storms, hurricanes and extreme cold weather will increase heating demand, and the prices of energy commodities such as natural gas and oil will increase.

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