If you’re looking to get into commodities trading, CFDs may be the way to go. This how-to guide will teach you everything you need to know about Trading commodities as CFDs, from what they are to how to get started. Commodities futures contracts have long been a popular investment tool, but with CFDs, you don’t have to worry about taking on the risk of buying and selling them yourself.
What are commodities and CFDs?
Commodities are natural resources like oil, gas, gold, and wheat. They’re traded on commodities exchanges worldwide, and their prices can be volatile. Futures contracts are agreements to buy or sell a commodity at a set price on a specific date. Investors use them to speculate on the future price or hedge against price fluctuations.
A CFD is a type of derivative that allows you to trade on the price movements of an underlying asset without owning it. You can trade CFDs on commodities such as gold, oil, and silver onPlus500. When you open a CFD trade, you’ll specify the size of your position and the price you want to buy or sell at.
How to trade commodities as CFDs
When you trade commodities as CFDs with Plus500, you’ll need to specify the size of your position and the price you want to buy or sell at. Your profit or loss will be based on the difference between the price you open at and the price you close at.
To open a long CFD position, you’ll need to choose the number of CFDs you want to buy and specify your entry price. To open a short CFD position, you’ll need to select the number of CFDs you want to sell and specify your entry price. Your exit price will be automatically calculated when you close your trade.
Your profit or loss will be based on the difference between your entry and exit prices and will be settled in the currency of the underlying commodity.
The benefits of trading commodities as CFDs
CFDs offer numerous advantages for traders interested in the commodities market.
Leverage- When you trade CFDs, you can do so with leverage. You can control a more prominent position than you would if you were buying the underlying asset outright. For example, if gold is trading at $1,200 per ounce and has a 1:10 leverage ratio, you can trade a contract worth $12,000 with only $1,200 in your account. It allows you to make a more significant profit if the price of gold moves in your favor, but it also amplifies your losses if it moves against you.
Short selling- With CFDs, you can short sell commodities, which means you can profit from falling prices and rising ones.
No need to take physical possession- When you trade CFDs, there’s no need to take physical possession of the underlying asset. CFDs are derivative contracts that derive their value from an underlying asset.
Trade around the clock- Commodities markets are open 24 hours a day, and with CFDs, you can trade any time that suits you.
How to get started trading commodities as CFDs
If you’re interested in trading commodities as CFDs, you can open a Saxo account –view website to find out how. Deposit funds into your account and start trading CFDs on various commodities.
CFD trading tips
Tips to get started with CFD trading:
Do your research- It’s essential to have a good understanding of the market before you start trading, and this means keeping up to date with the latest news and analysis and doing your research.
Use stop losses- A stop loss is an order that automatically closes your position at a specific price, and this can help you limit your losses if the market moves against you.
Use a demo account- A demo account is a great way to practice trading without putting any of your own money at risk. They can also be used to test out your strategies.
Smriti Jain is the owner and senior content publisher at Financesmarti. Financesmarti is a website where she shares a lot of useful stuff for the people and business of India. This includes small business ideas and other banking information, as well. Smriti completed her education in science & technology from Delhi University. Smriti usually has interests in digital marketing now, and she has chosen this career for the full-time opportunity. The primary purpose of starting this blog to provide quality information on the banking industry to the people.