Demo
Real

xtrade logo

The New Trader Guide to Commodity CFD Trading



Commodities are defined as basic goods or raw materials used in commercial activity. There are generally two types of commodities: soft commodities and hard commodities. Popular commodities in the Gulf Cooperation Council (GCC) include Brent crude oil, but substantial quantities of other commodities such as agricultural produce, heavy machinery, and consumer goods are also traded. Hard commodities are generally mined, while soft commodities are fished, farmed, harvested, or grown.

The world's most popular commodities include the likes of Brent crude oil, WTI crude oil, gold, silver, coffee, cotton, natural gas, corn, and wheat. Most every country trades these commodities in some other fashion, including GCC countries which are net exporters of Brent crude oil, and related products. Member countries of the GCC, such as Saudi Arabia, Bahrain, Kuwait, Qatar, Oman, and the UAE rely heavily on crude oil exports, with figures pointing to at least 80% of GDP being generated through oil, with non-oil imports far exceeding non-oil exports.



What is Commodities CFD Trading?

Commodities CFD trading is the buying and selling of commodity CFDs. A CFD is a derivative financial instrument. The price of a commodity CFD is derived from the underlying financial instrument, a.k.a. the commodity. At Xtrade.net, you can easily trade commodity CFDs in rising or falling markets. This is one of the major benefits. Typically, traders buy commodities with the hope that prices will rise in the future. Futures traders can buy or sell commodities in rising or falling markets. But the risks of futures trading are great and substantial capital reserves are required. Xtrade.net provides a simple alternative for trading commodities in bullish and bearish markets. It is known as commodity CFD trading.

CFD (Contracts for Difference) commodities trade with leverage. This means that traders like yourself only need to deposit a small amount (the margin requirement) to open a commodity CFD trade. For example, Brent crude oil CFDs can be traded with leverage of up to 200:1 at Xtrade.net. Put differently, this means that a commodity CFD trade valued at $10,000 could be traded with 200:1 leverage, or a deposit of $10,000 / 200 = $50. Naturally, there are many pros and cons associated with highly leveraged CFD trades, notably:

Pros of Leveraged CFD Trades

  • Only a small down payment is needed to open a substantial commodity trade.
  • High leverage allows you to diversify your financial portfolio by spreading your capital across many different positions. This is a powerful risk mitigation strategy.
  • Leveraged trades allow you to trade much larger positions than your capital would typically allow, exposing you to the possibility of substantial profits* (see Cons of Leveraged CFD Trades for losses) if trades move in your favour.
  • Leveraged commodity CFD trades can also be used to protect against downside risk in investments in equities markets. If you suspect a bearish trend is coming, you can sell commodity CFDs to safeguard your investments.
  • CFD trading is not typically subject to inflation-related risk. They are short-term financial instruments.

Cons of Leveraged CFD Trades

  • With CFD trades, margin calls may be required when trades start moving against you. This means that more capital will be withdrawn from your account to keep the trade open. If the capital is unavailable, the trade will close out and you may be liable for the losses.
  • While a smaller capital requirement is needed upfront, your liability is for the full value of the trade. In other words, you stand to lose substantially more than your deposit (you are liable for the full amount of the trade) if the commodity CFD trade moves against you.
  • A thorough understanding of CFD trading and the financial markets is required to make buy or sell assessments with commodity CFDs. Commodities are highly volatile financial instruments, and when coupled with CFD trading can be a losing proposition for the majority of traders.

What Commodities Are Available for Trading Xtrade.net?



The following commodities are available at Xtrade.net, with varying amounts of leverage. Traders are encouraged to click on a specific commodity, for full details of the spread per unit, premium buy, premium sell, maintenance margin, expiry dates, leverage, and trading hours

  • Oil
  • Cocoa
  • Cotton
  • Silver
  • Sugar
  • Wheat
  • Coffee
  • Copper
  • Soybean
  • Gasoline
  • Gold/USD
  • Palladium
  • Gold/EUR
  • Heating Oil
  • Natural Gas
  • Brent crude oil

Commodity CFDs are listed at the same price as the underlying financial instrument. This is usually the norm with commodity CFD trading at brokers. When trading commodities, you simply have to assess the specific markets to determine whether the underlying financial instrument will rise or fall in price over time. You can also learn about forex.

The accuracy of your judgement call will determine the profit or loss that you can generate. Again, it is important to point out that commodity CFD trading is a high-risk activity. It is not suited to all traders. Markets are uncertain at the best of times, and when you trade derivative products, you may be magnifying your exposure to losses.

Xtrade.net provides all new traders and experienced traders with access to a full range of trading tools and resources. These include a powerful trading platform – WebTrader – full access to mobile (Android and iOS) trading, and up-to-the-minute pricing. A wide range of financial instruments is available, with updated news and analysis, educational tools and resources, and professional trader support during market hours.

It takes less than 2 minutes to open an account with Xtrade. Use Credit Card, Skrill or Bank Transfer to fund your account.

List of Commodities

Ready to start trading?

Get started with your Xtrade account today

Trading CFDs involves significant risk of loss. Trading FX/CFDs involves a significant level of risk and you may lose all of your invested capital. Please ensure that you understand the risks involved.