CFD Commodity Trading

Contract For Difference (CFD) commodity trading allows for investors to bid on the changes in the value of particular commodities. CFDs do not require the trader to own the commodities themselves, only the difference from the initial price is exchanged between the broker and investor when the trade is complete. This article will discuss what commodities are, what CFD commodity trading is, what to look out for and the best online brokers.

Best CFD Commodity Trading Brokers

  1. Interactive Brokers - Over 8,000 CFDs are offered on a vast array of instruments, encompassing stocks, indices, forex, and commodities. Moreover, the TWS platform lends itself to seasoned day traders, offering a comprehensive selection of over 100 order types and algorithms, alongside premium market data sourced from reputable sources such as Reuters and Dow Jones.
  2. DNA Markets - DNA Markets offers a small suite of 250 CFDs covering stocks, indices, forex, commodities and cryptos, providing opportunities to speculate on rising and falling prices. There are no restrictions on strategies with leverage up to 1:30 (Australia) or 1:500 (rest of world).
  3. LQDFX - LQDFX offers a modest collection of CFDs covering currencies, metals, stocks, indices, commodities and cryptos. The 50+ technical indicators and drawing tools pre-included in MT4 will facilitate both short-term and long-term strategies.
  4. IG - IG offers a huge selection of 17,000+ CFDs, providing more trading opportunities than most CFD brokers. Traders can go long or short on popular markets like stocks, currencies, commodities and cryptos, while custom price alerts and the IG Academy continue to enhance the trading experience.
  5. IQCent - CFDs are available on forex, indices, commodities and cryptos, although the range of 100+ instruments is limited compared to alternatives such as Quotex with 400+. Leverage is available up to 1:500 but the $250 minimum deposit is noticeably higher than competitors.

CFD Commodity Trading Comparison

CFD Commodity Trading Comparison
Broker CFD Leverage Minimum Deposit Minimum Trade Regulators Visit
Interactive Brokers logo
1:50 $0 $100 FCA, SEC, FINRA, CBI, CIRO, SFC, MAS, MNB Visit
DNA Markets logo
1:500 $100 0.01 Lots ASIC Visit
LQDFX logo
1:1000 $20 0.01 Lots - Visit
IG logo
1:30 (Retail), 1:250 (Pro) $0 0.01 Lots FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA Visit
IQCent logo
1:500 $250 $0.01 IFMRRC Visit
Videforex logo
1:500 $250 $0.01 - Visit
ForexChief logo
1:1000 $10 0.01 Lots VFSC Visit
Axofa logo
1:1000 $1 0.01 Lots SVGFSA Visit
Sage FX logo
1:500 $10 0.01 Lots Pending Visit
Coinexx logo
1:500 0.001 BTC 0.01 Lots - Visit
RaceOption logo
1:500 $250 $0.01 - Visit
BinaryCent logo
1:500 $250 $0.01 VFSC Visit
World Forex logo
1:1000 $1 0.01 Lots SVGFSA Visit

#1 - Interactive Brokers

Why We Chose Interactive Brokers

Over 8,000 CFDs are offered on a vast array of instruments, encompassing stocks, indices, forex, and commodities. Moreover, the TWS platform lends itself to seasoned day traders, offering a comprehensive selection of over 100 order types and algorithms, alongside premium market data sourced from reputable sources such as Reuters and Dow Jones.

"Interactive Brokers is one of the best brokers for advanced day traders, providing powerful charting platforms, real-time data, and customizable layouts, notably through the new IBKR Desktop application. Its superb pricing and advanced order options also make it highly attractive for day traders, while its diverse range of equities is still among the best in the industry."

- DayTrading Review Team
  • FTSE Spread: 0.005% (£1 Min)
  • GBPUSD Spread: 0.08-0.20 bps x trade value
  • Stocks Spread: 0.003
  • Leverage: 1:50
  • Regulator: FCA, SEC, FINRA, CBI, CIRO, SFC, MAS, MNB
  • Platforms: Trader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentral

About Interactive Brokers

Interactive Brokers (IBKR) is a premier brokerage for experienced traders, providing access to 150 markets in 33 countries, along with a suite of comprehensive investment services. With over 40 years of experience, this Nasdaq-listed firm adheres to stringent regulations by the SEC, FCA, CIRO, and SFC, amongst others, and is one of the most trusted brokers for trading around the globe.

Pros

  • IBKR continues to deliver unmatched access to global stocks with tens of thousands of equities available from 100+ market centres in 24 countries.
  • The TWS platform has clearly been built for intermediate and advanced traders and comes with over 100 order types and a reliable real-time market data feed that rarely goes offline.
  • IBKR is one of the most respected and trusted brokerages and is regulated by top-tier authorities, so you can have confidence in the integrity and security of your trading account.

Cons

  • TWS’s learning curve is steep, and beginners may find it challenging to navigate the platform and understand all the features. Plus500's web platform is much better suited to new traders.
  • IBKR provides a wide range of research tools, but their distribution across trading platforms and the web-based 'Account Management' page lacks consistency, leading to a confusing user experience.
  • You can only have one active session per account, so you can’t have your desktop program and mobile app running simultaneously, making for a sometimes frustrating trading experience.

#2 - DNA Markets

Why We Chose DNA Markets

DNA Markets offers a small suite of 250 CFDs covering stocks, indices, forex, commodities and cryptos, providing opportunities to speculate on rising and falling prices. There are no restrictions on strategies with leverage up to 1:30 (Australia) or 1:500 (rest of world).

"DNA Markets is an excellent choice for short-term traders familiar with the MetaTrader platforms. The smooth sign-up process also makes it easy to get started while the $100 minimum deposit is accessible. That said, DNA Markets trails the top brokers in education, research and mobile trading. "

- DayTrading Review Team
  • FTSE Spread: 1.7
  • GBPUSD Spread: 1.0
  • Stocks Spread: 1.0 cent + $0.02 per share, per side (Apple)
  • Leverage: 1:500
  • Regulator: ASIC
  • Platforms: MT4, MT5

About DNA Markets

DNA Markets is a forex and CFD broker established in 2020. The broker operates two entities in Australia and the offshore jurisdiction, St Vincent and the Grenadines. Traders can access 250+ markets, with a Standard account for beginners and a Raw account for experienced traders. The reliable MetaTrader 4 and MetaTrader 5 platforms are available, alongside Signal Start.

Pros

  • Short-term trading strategies are permitted including scalping and automated trading using Expert Advisors (EAs)
  • Low trading fees with spreads from 0.0 pips in the Raw account and zero non-trading fees
  • Convenient account funding with 7 base currencies, a $100 deposit and a wide range of payment methods

Cons

  • Despite access to MT4 and MT5, there is no proprietary trading app
  • Although it continues to strengthen its client base and reputation DNA Markets lacks the track record of top brokers like Vantage
  • There are limited educational and research tools, reducing its appeal to beginners

#3 - LQDFX

Why We Chose LQDFX

LQDFX offers a modest collection of CFDs covering currencies, metals, stocks, indices, commodities and cryptos. The 50+ technical indicators and drawing tools pre-included in MT4 will facilitate both short-term and long-term strategies.

"LQDFX is best for active day traders looking for ultra-tight spreads, low fees and high leverage up to 1:1000. Forex traders will particularly appreciate the strong range of 70+ currency pairs with minimum deposits starting from $20."

- DayTrading Review Team
  • FTSE Spread: 0.90
  • GBPUSD Spread: 0.1
  • Stocks Spread: 0.05 (Apple Inc)
  • Leverage: 1:1000
  • Platforms: MT4

About LQDFX

LQDFX is a straight-through processing (STP) broker based in the Marshall Islands. The offshore trading firm offers competitive spreads from 0.0 pips, free deposits, 24/5 support and access to the hugely popular MetaTrader 4 platform. LQDFX also runs a competitive bonus program for short-term traders.

Pros

  • The $20 minimum initial deposit is accessible for beginners, and the Micro account will serve those looking to trade in smaller volumes
  • Tight forex spreads from 0.0 are available in the raw spread account and the $3.50 per lot commissions are in line with competitors
  • The broker offers the industry favorite MT4 platform and mobile app, with 30 technical indicators for chart analysis

Cons

  • Market research tools and educational resources are very limited compared to top brands like IG
  • The lack of regulatory oversight is a concern, although the broker does claim to use segregated accounts and balance protection
  • There are no additional charting platforms available, such as MT5 or a proprietary solution

#4 - IG

Why We Chose IG

IG offers a huge selection of 17,000+ CFDs, providing more trading opportunities than most CFD brokers. Traders can go long or short on popular markets like stocks, currencies, commodities and cryptos, while custom price alerts and the IG Academy continue to enhance the trading experience.

"IG continues to provide a comprehensive package with an intuitive web platform and best-in-class education for beginners, plus advanced charting tools, real-time data, and fast execution speeds for experienced day traders."

- DayTrading Review Team
  • FTSE Spread: 1.0
  • GBPUSD Spread: 0.9
  • Stocks Spread: 0.02
  • Leverage: 1:30 (Retail), 1:250 (Pro)
  • Regulator: FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA
  • Platforms: Web, ProRealTime, L2 Dealer, MT4, AutoChartist, TradingCentral

About IG

Founded in 1974, IG is part of IG Group Holdings Plc, a publicly traded (LSE: IGG) brokerage. The brand-US offers spread betting, CFD and forex trading across an almost unrivalled selection of 17,000+ markets, with a range of user-friendly platforms and investing apps. For 50 years, IG has maintained its position as an industry leader, excelling in all key areas for traders.

Pros

  • The IG app offers a superb mobile trading experience with a clean design that helped it secure Runner Up at our Best Trading App award
  • The proprietary web-based platform continues to caters to traders of all levels, with advanced charting tools and real-time market data useful for day trading
  • As a well-established broker, IG operates under strict regulatory guidelines in multiple jurisdictions, maintaining a high level of trust

Cons

  • Beginners might find IG’s fee structure complex, with various fees for different types of trades or services, potentially leading to confusion or unexpected charges
  • IG applies an inactivity fee of $12 per month after 2 years, deterring casual investors
  • IG has discontinued its swap-free account, reducing its appeal to Islamic traders

#5 - IQCent

Why We Chose IQCent

CFDs are available on forex, indices, commodities and cryptos, although the range of 100+ instruments is limited compared to alternatives such as Quotex with 400+. Leverage is available up to 1:500 but the $250 minimum deposit is noticeably higher than competitors.

"IQCent will appeal to day traders looking for a straightforward binary options and CFD trading platform with low fees, a range of accounts, and copy trading. Getting started takes less than 1 minute and a $250 deposit. "

- DayTrading Review Team
  • FTSE Spread: 1.4
  • GBPUSD Spread: 0.8
  • Stocks Spread: N/A
  • Leverage: 1:500
  • Regulator: IFMRRC
  • Platforms: Online Platform, TradingView

About IQCent

IQCent is an offshore binary options and CFD broker based in the Marshall Islands. The brand continues to offer a range of unique account types with bonuses and perks, including payout boosts, TradeBacks and free rollovers. With 100+ assets, around-the-clock trading and 98% payouts, the firm is popular with aspiring short-term traders.

Pros

  • Keen traders can take part in trading contests with cash prizes
  • The broker's 24/7 customer support is fast and reliable, responding within 1 minute during tests
  • The proprietary terminal offers TradingView-powered charts which deliver dozens of technical indicators and studies

Cons

  • There's no automated trading support for algo traders
  • IQCent trails binary brokers like Quotex with its narrow investment offering of around 100 assets with no stocks
  • IQCent charges a punitive $10 monthly inactivity fee if you fail to place at least 1 trade per month

What Are Commodities?

A commodity is a physical good that is usually a natural resource. Commodities of the same type are considered (almost) equal, no matter who produced them.

Goods and commodities that are fungible are not differentiated by brands or quality and their prices are determined by the performance of the market as a whole, closely following supply and demand.

Examples of goods that are used for CFD commodity trading are precious metals, oil and agricultural goods like rice.

Hard Commodities

Hard commodities are defined as those that are mined or extracted from the earth, i.e. natural resources that are not renewable. These are generally the most popular for CFD commodity trading and can be categorised into the following:

Metals

Metal commodities include gold, silver, copper and platinum. These metals are used in a variety of applications, such as jewellery (gold, silver), electronic wiring (copper) and other industrial uses (platinum, copper, silver etc.). Precious metals are, at times, invested in due to their reputation of being reliable stores of value, which can provide stability to some during periods of extreme market volatility.Gold CFD trading strategy and tips

Energy

Energy commodities consist of resources such as oil, natural gas, gasoline, etc. These commodities can also have other applications such as the production of plastics (oil), transportation (gasoline) and generating electricity (gas). Instability in this commodity market was seen during the COVID-19 pandemic, where the price of oil drastically fell due to the decrease in demand. Geopolitical factors can also influence the price of oil, particularly the policies of OPEC (Organisation of Petroleum Exporting Countries).

Soft Commodities

Soft commodities are defined as those that can be grown and cultivated, i.e. renewable resources. As such, the prices of these commodities are often more volatile, depending on external factors like climate and other environmental conditions. This has led to less popularity for CFD commodity trading than hard commodities, though investors with a large risk appetite may prefer these.

Agriculture

Agricultural commodities are natural resources like wheat, rice, coffee and corn. These are used as sources of food for both people and livestock, as well as the production of other products. It is common for the price of these goods to be heavily impacted by periods of turbulent weather, population growth and natural disasters.

Why Are Commodities Suitable For CFD Trading?

The price of commodities is affected by the concept of supply and demand. If there is more demand for the good than supply, then the price of the commodity increases, and vice versa. The growth of large economies like India and China has led to increases in the demand for various goods, such as metals and energy. Additionally, recent changes in the economic climate due to the pandemic have further impacted the rise and fall in the value of various commodities, making CFD commodity trading appealing given the ability to both buy long and sell short on these market variations.

Pros & Cons

Key takeaways that you should keep in mind about why CFD commodity trading could be beneficial to you are:

However, there are negatives that you should be aware of and understand before CFD commodity trading:

Strategies

CFD commodity trading is a different playing field from investing in company stocks. Given that CFDs are used for the most part as short-term investments, you will likely want to employ short-term intraday trading strategies when trading gold, coffee or other commodities.

You should also check the hours that the particular markets are open for trade. For coffee, the CFD commodity trading hours may be different from those of UK oil. As a general rule of thumb, CFD commodity trading can be conducted provided that the physical commodity market is open for trading.

Checking The News

You must look at the current price trends and latest news releases before beginning CFD commodity trading. Given that commodities are greatly influenced by supply and demand, you should take a bit of time to make yourself familiar with the particular instrument that you are interested in.

Is there a shortage of the particular commodity? Is there a surplus due to an exceptional harvest? Are there any laws or regulations being implemented that may impact the commodity? These are the sorts of questions you should be asking.

For example, when the news reported that a surplus of crude oil was beginning to form due to the drastic fall in demand for fuel during the initial lockdowns of the pandemic, it would have made sense to “short” the oil market as the price is expected to fall.

Hedging

As CFD commodity trading allows you to “short” a market, so you can trade any drop in value, you can utilise this as a means of counterbalancing your investment portfolio.

If you predict a sell-off of a commodity that you have already invested in, you can obtain short CFDs at a fraction of the price (using the margin decided by your broker) for the same amount of the commodity you possess.

This means any losses would be offset by the returns you make on the short CFD trade.

Check that your broker permits hedging first.

Scalping

This is one of the more popular strategies for CFD commodity trading. The aim of scalping is to exit positions quickly, with the aim of making small gains, reducing the risk of losing money from market reversals.

Again, check your broker permits scalping prior to trading.

As individual gains are often low, high margin levels are often used and a large number of trades are made throughout the day.CFD commodity trading with hard and soft commodities

How To Start CFD Commodity Trading

Choose A Broker

To begin CFD commodity trading, you will need to choose a broker. Some of the key factors to consider are:

Popular CFD brokers such as Trading 212 and eToro allow you to trade most commodities — especially popular ones like gold — using CFDs.

Opening Your Position

Before opening any position on a commodity of your choice, you should only invest an amount that you are comfortable with losing.

On most broker platforms, opening up a CFD commodity trading position is simple and easy. You will be presented with an option to buy (go long) or sell (short) your chosen commodity. Going long on a commodity will mean that you will gain when the price of the commodity increases while shorting a commodity is the opposite.

The CFD trading view on the broker platform should offer you most of the information you require to place your position, such as any graphs and informatics on the chosen commodity market.

Monitoring Your Position

Given that the losses incurred when CFD commodity trading can be considerable and profit windows can be slim, you should keep tabs on any open positions.

If you believe that the commodity market in which you invested is beginning to move in the wrong direction, you should consider exiting to reduce or avoid losses. Some platforms allow you to place stop-limit boundaries, which help you define your acceptable loss limit before automatically exiting.

Tips For Trading

Here are a few helpful tips that you can take on board whilst CFD commodity trading:

Final Word On CFD Commodities Trading

CFD commodity trading greatly improves the accessibility of the commodities markets, allowing retail traders to viably trade price fluctuations of natural resources without the logistic issues presented by physically purchasing the goods. CFDs also allow for margin trading, automated trading and the shorting of commodities from gold to crude oil to coffee beans. To get started with CFD commodity trading today, see our list of the top brokers here.

FAQs

What Is CFD Commodity Trading?

This is a form of derivatives trading that allows traders to speculate on commodity prices without owning the assets in question. When trading a commodity with a CFD, it allows the investor to speculate on the future price of that commodity without having to actually own it. One of the advantages of this method is that you can profit from the decrease in value as well as the increase.

What Are Commodities?

Commodities are physical goods that are often heavily involved in international trade. These can be energy sources like natural gas, precious metals like gold and silver or agricultural products like wheat or tea.

Supply and Demand?

Supply and demand is an economic model of price determination that is important to understand when CFD commodity trading. In a nutshell, when there is more supply than demand, the value of the commodity will decrease, and vice versa.

What Is Going Long And Short?

Going long when CFD commodity trading is much like purchasing some of a commodity. It is a prediction that the value of an asset will rise. Shorting an asset, or going short, is the opposite and the trade would finish in profit with a fall in the value of the asset – but lose if the asset value rose.

Can I Start CFD Commodity Trading In My Country?

Some countries like the US have banned CFD trading full stop. Whilst other countries may allow it, some only allow certain approved brokers to do these kinds of trades.