How to trade commodities CFDs

CFD trading
August 4, 2023

Welcome to the world of commodity CFD trading! If this is your first dip into the pool, our comprehensive guide should help to provide you with a solid foundation and enable you to start your journey into commodities trading with Change.

Like many tradable assets and instruments, things can seem complicated at first, but you’ve nothing to fret. From understanding commodity basics to exploring the benefits of trading these unique assets, Change has you covered.

So! Let's dive in and make a generous splash in your portfolio.

What exactly are commodities?

Commodities are raw materials or primary agricultural products that serve as the building blocks of the global economy. They can be broadly categorized into four main groups: metals (e.g., gold, silver, copper), energy (e.g., oil, natural gas), agricultural (e.g., wheat, coffee, soybeans), and livestock (e.g., cattle, hogs). Unlike stocks or bonds, commodities hold intrinsic value, as they are essential for various industries and consumption.

Commodity markets are influenced by supply and demand, global conditions, natural events… You name it! Trading commodities involves speculating on price movements, either by choosing to go long (buying) or short (selling).

🌾 Check out our detailed guide to CFD if “going short and long” sounds a bit foreign.

Are there Benefits to Trading Commodities?

Commodity trading offers several advantages for investors and traders alike. Unique to themselves, and often unaffected by other assets’ price fluctuations and factors.
Traders of commodity CFDs often find them to be:

Portfolio diversifiers

Commodities provide a means to diversify investment portfolios beyond traditional asset classes like stocks and bonds. Their performance often has a low correlation with other financial instruments, which can help mitigate overall portfolio risk.

Inflation fighting machines

Certain commodities, such as gold and other precious metals, have historically served as a hedge against inflation. When inflation rises, the value of these commodities may increase, preserving purchasing power.

Worldwide interest

Commodities are traded on international markets, allowing investors to gain exposure to various economies worldwide. This reach may create unique trading opportunities based on political and economic developments.

Trading with leveraged power

Through instruments like commodity Contracts for Difference (CFDs), traders can access leverage, boosting their market exposure with a smaller initial investment. However, leverage also entails higher risk, so it's crucial to use it prudently.

Trading CFD commodities with Change will allow you to earn greater from positive trades, using less capital. The risk is equally higher, as poor trades more quickly result in a loss of funds.

Understanding commodity CFDs and their risks

Commodity CFDs allow traders to speculate on the price movements of commodities without owning the underlying asset. When trading commodity CFDs, you are trading against the difference between the opening and closing prices for that asset. This approach provides flexibility, as you can take both long and short positions, potentially profiting from either rising or falling markets.

It's essential to remember that trading CFDs carries risk due to leverage and market volatility. We recommend you to mitigate your risk by having a trading plan, and only trading with funds you can afford to lose.

How to trade commodity CFDs at Change

Getting started with commodity trading on Change is a straightforward process. Begin by heading to the Prices screen and selecting the "Commodities" tab, where you'll find a range of available instruments.

There are 8 commodity instruments to choose from.
Once you've made your choice, opt for "Buy" if you anticipate the instrument's price is on the rise, or select "Sell" if you believe it's heading down.

Most commodity instruments come with a default leverage of 10x, offering potential for amplified gains. However, when it comes to Gold, you'll find an enhanced leverage of 20x. Alternatively, there's also an option to trade in physically-backed Investment Gold, which offers a different approach with no leverage involved.

Open the Change app today and use your margin trading account to trade these amazing assets and more!