Natural Gas

With various price determinants, high trading volumes and multiple investment vehicles, trading Natural Gas is a staple for many serious commodities investors. This overview covers all you need to know about trading Natural Gas in North America, Europe or globally. We cover markets like futures contracts, leveraged exchange-traded funds (ETFs) and trading companies with significant Natural Gas exposure. Read on for a complete Natural Gas trading 101. We have also listed the best brokers and platforms for Natural Gas trading in 2022.

Best Natural Gas Trading Brokers

  1. The leading US trading Exchange. Nadex offer genuine exchange trading to global clients on Binary Options. Fully regulated by the CFTC.

  2. IG-US offer spread betting, CFD and Forex trading across a range of markets. They are FCA regulated, boast a great trading app and have over 47 year track record of excellence.

    Forex trading involves risk. Losses can exceed deposits

  3. IB Boast a huge market share of global trading. With a minimum deposit of $10,000 however, they remain an option for larger traders only.

What Is Natural Gas?

Natural Gas (trading symbol – NG) is a fossil fuel energy source extracted from wells drilled into resource-rich areas of the environment. Raw Natural Gas is sent to a refinery where certain compounds are separated and the fuel is distilled into consumer-grade Natural Gas.

This final product is burned to generate electricity and heating for residential properties and industrial environments. The gas also fuels specialist vehicles and provides an energy source for the compressors that move resources through large-scale pipeline networks.

Natural Gas is a prevalent energy source, with over 35% of all US electricity generated by burning this fuel. However, this will likely change in the future, with a global pivot towards cleaner, renewable energy underway.

Natural Gas intraday trading strategy today
Natural Gas Historical Prices Incl. Inflation Adjustment & Recessions

Natural Gas Trading Fundamentals

There are several key price determinants that impact the value of Natural Gas. Good knowledge of these factors is required to underlie any water-tight trading analysis and strategy for the asset.

Availability

The most basic principles of trading price economics are supply and demand. Therefore, the availability of Natural Gas is perhaps the best indicator for Natural Gas trading prices.

Our experts recommend that investors keep an eye on trading news for the discovery of new drilling fields, global transportation issues and increased duties on major regional fuel imports and exports.

Seasonal Demand

The demand for Natural Gas is affected by season and weather. As investors may expect, colder seasons in major Natural Gas consumer regions will raise the commodity’s demand and increase the price.

However, hot weather can also trigger a significant increase in the demand for Natural Gas. This is because an increase in air conditioning and other cooling solutions will increase the electricity demand.

Availability & Cost Of Alternatives

The availability of Natural Gas alternatives, such as Petroleum, also plays a crucial part in determining prices.

When alternatives are scarce or expensive, Natural Gas will also increase in price. This is due to greater demand from the industrial sectors that need a combustible fuel source for their production.

On the other hand, an increase in supply or a reduction in the cost of Natural Gas alternatives will lower its value.

When trading Natural Gas, it is always a good idea to keep on top of the news for related commodities such as Crude Oil or Petroleum to stay ahead of the markets.

Global Economic Health

When the global economy is facing a downturn, industry and consumers alike will be looking to save money by slashing bills wherever possible. This may lead to reduced demand for Natural Gas as companies and individuals reduce their heating and electricity use where possible.

Fossil Fuel Sentiment

As the switch to cleaner energy progresses, different global regimes move towards climate goals at different rates.

As a result, new emissions targets and international agreements may trigger a decrease in Natural Gas prices, especially in the futures markets. On the other hand, the relaxing of targets by other nations may cause an increase in the asset’s value.

In addition, anti-fossil fuel movements in the trading sphere, such as ESG investing, may cause a decrease in Natural Gas company stock values as individual and institutional investors move away from polluters.

Natural Gas daily trading data and real-time price quotes
Natural Gas Prices & Numbers – 2002 – 2022

How Does Natural Gas Trading Work?

As with most fuels, Natural Gas is a publicly traded commodity, with investors able to trade the resource via several vehicles. These range from investments in the underlying asset to purely derivative-based trading and include cash markets, futures contracts, ETFs and CFDs. The best Natural Gas brokers and platforms offer a choice of these instruments:

Spot Trading

Spot trading involves the purchase and sale of physical units of Natural Gas. Assets are exchanged at the current market trading price.

Spot trading involves dealing directly with the commodity itself, meaning investors must ensure they can either store their Natural Gas or move it on directly to a buyer. Spot trading may also be used as a hedging or arbitrage strategy when trading futures contracts.

Futures Contracts

Futures contracts are agreements to buy or sell a unit value of a specific asset for a set price at a particular time. These contracts can last from one month to several years and are exchange-traded between suppliers, investors and consumers.

Trading Natural Gas futures exposes investors to longer-term price quotes and is a versatile instrument suitable for both day trading and swing trading. The CTFC, regulator oversees these markets in the USA on exchanges such as the NYMEX and CME. Futures are also regulated in London in the UK and across Europe.

As futures are physical contracts rather than derivatives, Natural Gas traders will need to look to resell futures contracts before the last trading day. This will avoid unwitting investors having to take delivery of the commodity.

CFDs

The simple definition is that CFDs, or contracts for difference, allow traders to speculate on the price of an asset with significant leverage, sometimes up to 1:500. Natural Gas CFDs are usually traded on their futures contract value. However, some CFD brokers may offer spot price speculation.

Using a derivative like a CFD eliminates the need to worry about having to take delivery of Natural Gas units. However, due to their high leverage, this form of trading comes with increased risk compared to other instruments.

This forex-style trading method best suits day trading strategies to avoid overnight fees for maintaining positions longer than one trading day.

Spread Betting

Spread betting is similar to CFD trading but is classed as gambling in some jurisdictions, such as the UK. This can lead to tax advantages for some traders.

As with CFDs, the high leverage involved in spread trading Natural Gas means that investments come with additional risk but the potential for more significant upside.

Binary Options

Binary options are another vehicle when trading Natural Gas.

Binary options boast advantages such as capped losses, payouts of up to 95% and a wide range of contract lengths as low as three seconds with some brokers. Indeed, day trading Natural Gas using binary options can turn even small price movements into lucrative gains.

However, this is not a well-regulated instrument, and the downside of capped losses is capped gains on successful trades.

Options

Options offer investors the best of both worlds in that contracts can either be cash-settled or exercised to claim the underlying asset. As with futures contracts, this instrument is exchange-traded and regulated by the CFTC in the US.

Traders can either go long or short when options trading Natural Gas, with each contract corresponding to 100 units to provide substantial innate leverage.

Options are best suited to swing trading, though some investors trade last trading day (0DTE) options as a more risky strategy.

ETFs

For those who wish to speculate on the spot price of Natural Gas, trading an ETF that tracks this price is a potential option.

Investors can increase or decrease their exposure to price fluctuations using leveraged ETFs, with levels typically between 0.5x and 3x leverage. Traders can also go short on Natural Gas prices by trading using an inverse ETF.

Investors can also gain exposure to Natural Gas companies with an ETF on Natural Gas trading companies. This differs from a mutual fund as ETFs can be purchased and sold intraday, opening up the possibility for swing and day trading.

Traders based in Europe, the UK or the rest of the world should note that ETFs are more accessible to non-US investors than options or futures contracts.

Stocks & Mutual Funds

Our final suggested method to gain exposure to Natural Gas is trading companies related to the industry. Investors can achieve this through single stocks or mutual funds concentrated on the energy sector.

As well as potentially diversifying an investment to cover several energies, trading oil and gas companies opens the possibility of receiving dividends. These dividends are often significant when trading the largest Natural Gas trading companies, for example, Shell and BP.

Education

Despite the relatively straightforward price determinants of Natural Gas, its value can often be unpredictable, even for seasoned traders. For this reason, our experts recommend arming yourself with a solid understanding of Natural Gas trading, whether by reading books, attending courses or doing your own research online.

This will involve extra time and expense or following signals for recommended forecasts. However, the ability to conduct reasoned analysis and set independent price targets is how to make money trading Natural Gas in the long run.

Pros Of Trading Natural Gas

Benefits of signing up with the top Natural Gas trading brokers include:

  • Products – There is a wide range of investment vehicles which can be used to trade Natural Gas
  • Combo Potential – Investors can hedge one investment with another by combining futures, options and spot positions
  • A Relevant Commodity – Natural Gas remains a highly global relevant commodity despite environmental concerns
  • Straightforward Price Determinants – Natural Gas prices are mainly determined by simple supply and demand
  • High Volatility – Natural Gas is one of the most volatile commodities, offering strong profit potential

Cons Of Trading Natural Gas

Disadvantages to trading Natural Gas include:

  • Environmentally Unfriendly – ESG-conscious investors may want to avoid this market
  • Not The Most Liquid Commodity – Despite the popularity of Natural Gas, several oil and metals markets have higher trading volumes
  • Diminishing Long-Term Prospects – As the world transitions away from fossil fuels for its energy needs, Natural Gas will experience less and less demand
  • High Volatility – While high volatility opens up lucrative trading opportunities, sharp short-term trends can be a disadvantage for longer-term strategies

How do you make money trading natural gas?

Natural Gas Trading Strategies

Many Natural Gas trading strategies are available to investors, from simple to complex, from manual to trading-bot-powered methods. Here are a few of our experts’ top strategy tips to get you started:

Trading The News

This short-term investment strategy consists of reacting to news and announcements faster than the market. Many traders use the motto ‘buy the rumour, sell the news’ as a guide. Trading forums can be a good place to get early insights into major news events and tips.

Swing or intraday trading Natural Gas using binary options, CFDs, leveraged ETFs, or spread bets is well suited to news-based speculation.

Long-Term Investing

Longer-term price predictions based on factors such as seasonal change or global supply are also well-suited to Natural Gas. The best instruments for this strategy are stocks, ETFs and futures contracts.

Covered Calls

Covered calls are an options strategy designed to generate small but consistent profits. For this, investors need to hold a long spot position on Natural Gas and then sell short positions to investors. The options premium is the profit of this trade.

However, storing spot Natural Gas may be an issue for most traders. As a result, this strategy may be limited in its practicality.

Hedging & Arbitrage

In trading, arbitrage involves taking advantage of price discrepancies between different exchanges or instruments to profit. Hedging works similarly but is used as a strategy to reduce risks when trading by taking on an opposing position in a similar asset or instrument.

Options contracts, futures contracts and spot Natural Gas are the best instruments for this strategy.

Trading Times

Natural Gas markets operate at different times worldwide depending on the specific asset. Depending on the local exchange where the product is sold, the Natural Gas trading hours vary. For example, when trading CME Natural Gas futures, the trading times in Germany, India, Canada and the US will differ. With that said, a significant amount of trading volume is seen between 6 pm US ET to 5 pm US ET, Sunday to Friday.

Note, the best Natural Gas brokers provide opening times and market closures on their websites. They will also provide economic calendars and holidays sessions. In addition, they make provide after-hours trading and support for algorithmic trading strategies.

Final Word On Trading Natural Gas

Despite the slow global shift away from fossil fuels, commodity trading Natural Gas remains a volatile, high-volume and lucrative market. With simple price determinants, high international demand and various instruments available to suit every investment style, serious commodity traders should not overlook Natural Gas as a potentially profitable market.

Use our list of the top brokers for trading natural gas to get started.

FAQ

What Is Natural Gas Trading At Today?

There are several prices related to Natural Gas, such as tracker ETF prices, spot values, futures contracts and company equity values. Interested parties can view most of these on a service such as TradingView or Yahoo Finance.

What Is The Best Natural Gas Trading Strategy?

The wide range of instruments available for Natural Gas trading means no shortage of strategies will work. However, our experts recommend starting with methods like trading news, or investing in long-term trends as a starting point.

What Is The Lot Size Of Natural Gas?

Futures and options contracts for Natural Gas will usually trade in lot sizes of 100 units. However, relative trade size can be increased using CFDs or spread betting through leverage.

Is Trading Natural Gas Profitable?

Many investors will want to know how to make money trading Natural Gas. The volatile market conditions present plenty of opportunities for profitable trading. However, ensure you do your due diligence before diving straight into the markets. Use our overview to day trading Natural Gas to get started.

What Time Does Natural Gas Start Trading?

There are several international instruments to trade Natural Gas, all with unique market hours based on their local exchanges. However, as most Natural Gas instruments, such as the CME Natural Gas futures product, are US-based, US market hours will likely be the ones to follow.