country flag
  1. Home
  2. CFD Day Trading

CFD Commodity Trading

Contributor Image
Written By
Jemma Grist
Contributor Image
Written By
Jemma Grist
Jemma is a writer, editor and fact-checker focused on retail trading and investing. Jemma brings a unique perspective to the forex, stock, and cryptocurrency markets and works across several investment websites as a researcher and broker analyst.
» Jemma Grist Profile Page
Contributor Image
Edited By
Tobias Robinson
Contributor Image
Edited By
Tobias Robinson
Tobias is a partner at DayTrading.com, director of a UK limited company and active trader. He has over 25 years of experience in the financial industry and contributed via CySec to the regulatory response to digital options and CFD trading in Europe. Toby’s expertise and dedication to financial education make him a trusted voice in the industry, including a BBC investigation into digital options.
» Tobias Robinson Profile Page
Contributor Image
Fact Checked By
William Berg
Contributor Image
Fact Checked By
William Berg
William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.
» William Berg Profile Page
Updated
Jul 24, 2024

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

Click a broker for details
  1. 1
    DNA Markets
    Ratings
    3 / 5
    4 / 5
    4 / 5
    3.9 / 5
    3.5 / 5
    3.6 / 5
    1.8 / 5
    1.6 / 5
    4.8 / 5
    4.4 / 5
    $100
    0.01 Lots
    1:500
    ASIC
    CFDs, Forex, Indices, Commodities, Stocks, Crypto
    MT4, MT5
    Credit Card, Debit Card, Wire Transfer, BPAY, Skrill, Neteller, Bitcoin Payments, Bitwallet, AstroPay, Mastercard
    USD, EUR, GBP, CAD, AUD, NZD, SGD
    Go To DNA Markets
  2. 2
    IG
    Forex trading involves risk. Losses can exceed deposits.
    Ratings
    4.9 / 5
    4 / 5
    4.5 / 5
    3.5 / 5
    4.8 / 5
    4.5 / 5
    4.9 / 5
    5 / 5
    4.6 / 5
    4 / 5
    $0
    0.01 Lots
    1:30 (Retail), 1:250 (Pro)
    FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB
    CFDs, Forex, Stocks, Indices, Commodities, ETFs, Futures, Options, Crypto, Spread Betting
    Web, ProRealTime, L2 Dealer, MT4, AutoChartist, TradingCentral
    PayPal, Wire Transfer, Mastercard, Credit Card, Visa, Debit Card
    USD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD
    Go To IG
  3. 3
    IQCent
    20% to 200% Deposit Bonus
    Ratings
    2.5 / 5
    3.3 / 5
    2.4 / 5
    4.3 / 5
    3.8 / 5
    2.5 / 5
    3 / 5
    2 / 5
    4.3 / 5
    4.1 / 5
    $250
    $0.01
    1:500
    IFMRRC
    Binary Options, CFDs, Forex, Indices, Commodities, Crypto
    Online Platform, TradingView
    Credit Card, Debit Card, Wire Transfer, Bitcoin Payments, Ethereum Payments, Visa, Mastercard
    USD, EUR
    Go To IQCent
  4. 4
    RedMars
    Ratings
    3.3 / 5
    3.5 / 5
    3.8 / 5
    3.5 / 5
    3.8 / 5
    4 / 5
    2.8 / 5
    3 / 5
    4.7 / 5
    4.6 / 5
    €250
    0.01 Lots
    1:30 (Retail), 1:500 (Pro)
    CySEC
    CFDs, Forex, Stocks, Indices, Commodities, Cryptos
    MT5
    Credit Card, Wire Transfer, Debit Card, Sticpay, FasaPay, Bitcoin Payments, Trustly, PayPal, Skrill, Neteller, Klarna, Mastercard, Visa
    USD, EUR
    Go To RedMars
  5. 5
    Interactive Brokers
    Ratings
    4.5 / 5
    3.5 / 5
    4.5 / 5
    4.3 / 5
    3.3 / 5
    3 / 5
    4.4 / 5
    4.3 / 5
    4.3 / 5
    4.5 / 5
    $0
    $100
    1:50
    FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA
    Stocks, Options, Futures, Forex, Funds, Bonds, ETFs, Mutual Funds, CFDs, Cryptocurrencies
    Trader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentral
    Cheque, ACH Transfer, Wire Transfer, Automated Customer Account Transfer Service, TransferWise, Debit Card
    USD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF
    Go To Interactive Brokers
  6. 6
    Videforex
    20% to 200% Deposit Bonus
    $250
    $0.01
    1:500
    Binary Options, CFDs, Forex, Indices, Commodities, Crypto
    TradingView
    Skrill, Perfect Money, Bitcoin Payments, Neteller, Credit Card, Visa, Mastercard, Ethereum Payments
    USD, EUR, GBP, AUD, RUB
    Go To Videforex
  7. 7
    xChief
    $100 No Deposit Bonus
    $10
    0.01 Lots
    1:1000
    VFSC
    CFDs, Forex, Metals, Commodities, Stocks, Indices
    MT4, MT5
    Wire Transfer, Bitcoin Payments, Credit Card, UnionPay, Skrill, Neteller, WebMoney, Perfect Money, Debit Card, Ethereum Payments, FasaPay, Volet
    USD, EUR, GBP, JPY, CHF
    Go To xChief
  8. 8
    Axofa
    10% Deposit Bonus
    $1
    0.01 Lots
    1:1000
    SVGFSA
    Forex, CFDs, Stocks, Indices, Commodities
    MT5
    Debit Card, Credit Card, Visa, Mastercard, Neteller, Skrill, Bitcoin Payments, Wire Transfer
    USD, IDR
    Go To Axofa
  9. 9
    Sage FX
    $1,500 trading competition
    $10
    0.01 Lots
    1:500
    Pending
    Forex, indices, cryptos
    TradeLocker
    Credit Card, Visa, Mastercard, Bitcoin Payments, Ethereum Payments
    USD, EUR, GBP, CAD, AUD
    Go To Sage FX
  10. 10
    InstaTrade
    Ratings
    2.5 / 5
    3 / 5
    3 / 5
    3 / 5
    3.5 / 5
    3.5 / 5
    3.5 / 5
    3.3 / 5
    4.8 / 5
    4.4 / 5
    $1
    0.01
    1:1000
    BVI FSC
    FISP, CFDs, Forex, Stocks, Indices, Commodities, Cryptos, Futures
    InstaTrade Gear, MT4
    Visa, Mastercard, Wire Transfer, Credit Card, Debit Card, Bitcoin Payments, Ethereum Payments
    USD, EUR, RUB
    Go To InstaTrade

Here is a short overview of each broker's pros and cons

  1. DNA Markets - DNA Markets offers a recently enhanced suite of 800+ 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).
  2. 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.
  3. 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.
  4. RedMars - RedMars caters to various short-term trading styles across popular asset classes, including 7 commodities, 14 indices, and 120+ stocks. Leverage is available up to 1:30 (retail) and 1:500 (pro), amplifying results. However, there is no calculator to help with understanding margin requirements and the depth of investments is limited.
  5. 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.
  6. Videforex - Videforex CFDs are available on forex, indices, cryptocurrencies and commodities with up to 1:500 leverage and tight spreads from near zero. CFDs incur a commission fee of 1%–2.5% and up to 5% for leveraged trades.
  7. xChief - You can trade a competitive range of CFDs encompassing crypto, indices, energies and metals, with very high leverage up to 1:1000. ECN pricing is available, with spreads from 0.0 pips and low commissions from $2.50. A Cent account is also available for those on a smaller budget.
  8. Axofa - CFDs are available on popular asset classes with a competitive $1 minimum deposit. The MT5 integration will allow serious short-term traders to utilize the vast library of technical tools, bots and indicators, but the lack of any CFD trading education puts the broker behind many alternatives.
  9. Sage FX - Trade CFDs on forex, stocks, metals, energies, indices, cryptos and dollar futures. Sage FX offers tight spreads and high leverage on all instruments from 1:100 to 1:500.
  10. InstaTrade - InstaTrade offers the flexibility to trade CFDs across various markets, from stocks and indices to forex and commodities. Where it excels is its dynamic leverage up to 1:1000, amplifying potential returns and losses with negative balance protection preventing accounts from falling below zero.

CFD Commodity Trading Comparison

CFD Commodity Trading Comparison
Broker CFD Leverage Minimum Deposit Minimum Trade Regulators
DNA Markets logo
1:500 $100 0.01 Lots ASIC
IG logo
1:30 (Retail), 1:250 (Pro) $0 0.01 Lots FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB
IQCent logo
1:500 $250 $0.01 IFMRRC
RedMars logo
1:30 (Retail), 1:500 (Pro) €250 0.01 Lots CySEC
Interactive Brokers logo
1:50 $0 $100 FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA
Videforex logo
1:500 $250 $0.01 -
xChief logo
1:1000 $10 0.01 Lots VFSC
Axofa logo
1:1000 $1 0.01 Lots SVGFSA
Sage FX logo
1:500 $10 0.01 Lots Pending
InstaTrade logo
1:1000 $1 0.01 BVI FSC

DNA Markets

"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. "

Jemma Grist, Reviewer

DNA Markets Quick Facts

FTSE Spread1.7
GBPUSD Spread1.0
Stocks Spread1.0 cent + $0.02 per share, per side (Apple)
Leverage1:500
RegulatorASIC
PlatformsMT4, MT5
Account CurrenciesUSD, EUR, GBP, CAD, AUD, NZD, SGD

Pros

  • Convenient account funding is available with 7 base currencies, a $100 deposit and a wide range of payment methods
  • After a recent upgrade, there are now over 800 assets available to trade via CFDs, with a particularly impressive range of 120+ cryptos
  • You can access low trading fees with spreads from 0.0 pips in the Raw account and zero non-trading fees

Cons

  • Despite access to MT4 and MT5, there is no proprietary trading app for seamless account management whilst on the go
  • Although it continues to strengthen its client base and reputation, DNA Markets lacks the track record of top brokers like Vantage
  • Unlike many alternatives, there are limited educational and research tools for traders seeking an all-in-one solution
Visit DNA Markets
DNA Markets Review

IG

"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."

Christian Harris, Reviewer

IG Quick Facts

FTSE Spread1.0
GBPUSD Spread0.9
Stocks Spread0.02
Leverage1:30 (Retail), 1:250 (Pro)
RegulatorFCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB
PlatformsWeb, ProRealTime, L2 Dealer, MT4, AutoChartist, TradingCentral
Account CurrenciesUSD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD

Pros

  • IG is amongst the best in terms of its range of instruments, which includes stocks, forex, indices, commodities, and cryptocurrencies, providing ample diversification opportunities
  • The ProRealTime advanced charting platform is free as long as certain modest monthly trading activity requirements are met
  • IG offers an extensive collection of professional and engaging educational resources, including webinars, articles, and analysis

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 has discontinued its swap-free account, reducing its appeal to Islamic traders
  • While there is negative balance protection in the UK and EU, there is no account protection or guaranteed stop losses for US clients
Visit IG
IG Review

IQCent

"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. "

Jemma Grist, Reviewer

IQCent Quick Facts

Bonus Offer20% to 200% Deposit Bonus
FTSE Spread1.4
GBPUSD Spread0.8
Stocks SpreadN/A
Leverage1:500
RegulatorIFMRRC
PlatformsOnline Platform, TradingView
Account CurrenciesUSD, EUR

Pros

  • The proprietary terminal offers TradingView-powered charts which deliver dozens of technical indicators and studies
  • The broker offers up to 98% payouts on binary options, which is more than alternatives like Pocket Option, only offering up to 92%
  • CFD trading fees are competitive based on tests, including 0.7 pips on major forex pairs such as EUR/USD

Cons

  • IQCent trails binary brokers like Quotex with its narrow investment offering of around 100 assets with no stocks
  • The broker is not overseen by a respected regulator, though this is common among binary options firms
  • IQCent charges a punitive $10 monthly inactivity fee if you fail to place at least 1 trade per month
Visit IQCent
IQCent Review

RedMars

"RedMars is the best fit for experienced day traders familiar with the MetaTrader 5 platform and based in the EU, where the broker is authorized by the CySEC. However, the threadbare education and research tools make it unsuitable for beginners."

Christian Harris, Reviewer

RedMars Quick Facts

FTSE Spread15
GBPUSD Spread0.7
Stocks SpreadVariable
Leverage1:30 (Retail), 1:500 (Pro)
RegulatorCySEC
PlatformsMT5
Account CurrenciesUSD, EUR

Pros

  • The broker is one of a limited number of firms to offer an account specially designed for VIPs with premium support and invites to exclusive events
  • RedMars offers one of the best platforms for day trading, MT5, hosting 21 timeframes, dozens of analytical tools, flexible templates and algo trading
  • Clients in the EU, in particular, can trade with peace of mind knowing RedMars is authorized by the CySEC with up to €20K compensation available through the ICF in the event of bankruptcy

Cons

  • The no-frills trading environment offers little beyond the basics, with no Islamic account, PAMM account or copy trading.
  • RedMars falls short for newer traders, with little in the way of education, no beginner-friendly platform, a steep minimum deposit, and inadequate support during testing
  • While RedMars' spreads are within industry averages, they don't offer a significant edge over the cheapest day trading brokers we've personally used, notably IC Markets
Visit RedMars
RedMars Review

Interactive Brokers

"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."

Christian Harris, Reviewer

Interactive Brokers Quick Facts

FTSE Spread0.005% (£1 Min)
GBPUSD Spread0.08-0.20 bps x trade value
Stocks Spread0.003
Leverage1:50
RegulatorFCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA
PlatformsTrader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentral
Account CurrenciesUSD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF

Pros

  • There's a vast library of free or paid third-party research subscriptions catering to all types of traders, plus you can enjoy commission reimbursements from IBKR if you subscribe to Toggle AI.
  • 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.
  • IBKR continues to deliver unmatched access to global stocks with tens of thousands of equities available from 100+ market centres in 24 countries.

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.
  • 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.
  • Support can be slow and frustrating based on tests, so you might find it challenging to reach customer service representatives promptly or encounter delays in resolving issues.
Visit Interactive Brokers
Interactive Brokers Review

Videforex

"Newer traders will find a lot to enjoy about trading binary options on Videforex's easy-to-use proprietary platform, as well as the broker's copy trading solution. Payouts also remain higher than most alternatives climbing to 98%."

William Berg, Reviewer

Videforex Quick Facts

Bonus Offer20% to 200% Deposit Bonus
FTSE SpreadFloating from 0.2
GBPUSD SpreadFloating from 0.1
Stocks SpreadNA
Leverage1:500
PlatformsTradingView
Account CurrenciesUSD, EUR, GBP, AUD, RUB

Pros

  • The firm facilitates both day trading and binary options which is great for those looking to diversify their portfolios
  • The support times are fast and reliable based on tests - few brokers offer 24/7 multi-lingual video support
  • Traders can earn up to 98% payouts on 100+ assets with the broker’s binary options, which is in line with competing brands like IQCent

Cons

  • No MetaTrader 4 integration
  • US clients aren’t accepted due to legal restrictions
  • The broker isn’t overseen by a trusted regulatory agency
Visit Videforex
Videforex Review

xChief

"xChief continues to prove popular with investors looking to trade highly leveraged CFDs on the popular MetaTrader platforms. The broker's rebate scheme and investment accounts will particularly appeal to seasoned traders. However, the lack of top-tier regulatory oversight is a major drawback."

William Berg, Reviewer

xChief Quick Facts

Bonus Offer$100 No Deposit Bonus
FTSE Spread70
GBPUSD Spread0.9
Stocks Spread50
Leverage1:1000
RegulatorVFSC
PlatformsMT4, MT5
Account CurrenciesUSD, EUR, GBP, JPY, CHF

Pros

  • xChief offers STP/ECN execution with low spreads from 0.0 pips and low commission rates starting from $2.50 per side
  • xChief delivers a high-quality day trading environment via the MT4 and MT5 platforms, with market-leading charts, indicators and tools
  • The low minimum deposit of $10 will appeal to beginners, as well as the beginners’ guides in the Library

Cons

  • The Classic+ and Cent accounts provide access to fewer instruments than the other account types, at 50+ and 35+, respectively
  • The total range of 150+ assets is much lower than most competitors who typically offer hundreds
  • xChief is an offshore broker with weak regulatory oversight from the VFSC, so traders will receive limited safeguards
Visit xChief
xChief Review

Axofa

"Axofa could be a good option for clients looking for social trading features alongside the MT5 platform. The low entry requirements and ECN spreads are particularly promising, but the lack of transparency and respected regulatory oversight raises security concerns."

William Berg, Reviewer

Axofa Quick Facts

Bonus Offer10% Deposit Bonus
FTSE SpreadNA
GBPUSD SpreadFrom 1.6 pips
Stocks SpreadNA
Leverage1:1000
RegulatorSVGFSA
PlatformsMT5
Account CurrenciesUSD, IDR

Pros

  • The broker offers a range of local payment methods, especially for clients in Asia, as well as crypto deposits
  • There's a proprietary social/copy trading service for beginners looking to follow successful strategies and for experienced traders looking to sell their strategies
  • Low ECN spreads are available from 0.0 pips, plus reasonable commissions at $3.50 per side

Cons

  • The offshore operations and lack of any regulatory oversight is a major concern
  • There is a lack of transparency around pricing and account conditions, which significantly reduces the trust score
  • There is limited verifiable information about the broker’s owners and background
Visit Axofa
Axofa Review

Sage FX

"Sage FX will suit forex traders looking for high leverage and ECN spreads. The broker's prop trading service will also appeal to users looking for funded accounts with up to $200K available."

Tobias Robinson, Reviewer

Sage FX Quick Facts

Bonus Offer$1,500 trading competition
FTSE Spread5.0
GBPUSD Spread0.9
Stocks SpreadN/A
Leverage1:500
RegulatorPending
PlatformsTradeLocker
Account CurrenciesUSD, EUR, GBP, CAD, AUD

Pros

  • Flexible accounts with STP and ECN solutions available
  • Bonus offers and trading competitions
  • Low starting deposit from $10

Cons

  • Relatively narrow range of asset classes
  • Lacks educational resources and other extra features
  • Not regulated by any reputable body
Visit Sage FX
Sage FX Review

InstaTrade

"Although InstaTrade offers active trading on a comprehensive platform, it stands out with its fairly unique Fixed Income Structured Product (FISP), providing passive investment opportunities with up to 50% returns in 6 months if conditions are met. "

Christian Harris, Reviewer

InstaTrade Quick Facts

FTSE Spread660
GBPUSD Spread0.2
Stocks Spread8 (Apple Inc)
Leverage1:1000
RegulatorBVI FSC
PlatformsInstaTrade Gear, MT4
Account CurrenciesUSD, EUR, RUB

Pros

  • InstaTrade claims to "guarantee" returns through the structured element of its passive trading solution (FISP), with applications approved within 24 hours.
  • InstaTrade TV, consisting of video interviews and valuable market insights spanning equities, cryptos and more, helps identify opportunities and inform short-term trades.
  • InstaTrade delivers an excellent suite of charting tools for day traders with its web trader comprising 250+ indicators, 11 chart types and a user-friendly design.

Cons

  • Profits are only guaranteed in the FISP if investors do not reach the 50% profit level and attract other users with a total sum of $4 for each dollar in compensation.
  • InstaTrade is registered in the offshore jurisdiction of the British Virgin Islands, resulting in limited regulatory safeguards for retail investors.
  • InstaTrade sports one of the most cluttered websites and client cabinets in the industry, potentially overwhelming new traders, especially compared to XTB’s intuitive trading journey and resources.
Visit InstaTrade
InstaTrade Review

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.

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). Geopolitical factors can 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.

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.

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.

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.

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

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.