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
    Interactive Brokers
    Ratings
    4.5 / 5
    3.5 / 5
    4.6 / 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, AFM
    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
  2. 2
    IG
    Forex trading involves risk. Losses can exceed deposits.
    Ratings
    4.9 / 5
    4 / 5
    4.5 / 5
    3.5 / 5
    4.9 / 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, AFM
    CFDs, Forex, Stocks, Indices, Commodities, ETFs, Futures, Options, Crypto, Spread Betting
    Web, ProRealTime, L2 Dealer, MT4, TradingView, 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, AFM
    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
    Capitalcore
    40% Deposit Bonus up to $2,500
    Ratings
    3.3 / 5
    3.8 / 5
    3.5 / 5
    3 / 5
    3.8 / 5
    3.5 / 5
    2.5 / 5
    3.5 / 5
    0 / 5
    0 / 5
    $10
    0.01 Lots
    1:2000
    IFSA
    Forex, Metals, Stocks, Cryptos, Futures Indices
    WebTrader, Pro
    Ethereum Payments, Mastercard, Visa, Perfect Money, Bitcoin Payments, Debit Card, Credit Card, PayPal
    USD
    Go To Capitalcore
  6. 6
    Videforex
    20% to 200% Deposit Bonus
    Ratings
    2.5 / 5
    3 / 5
    3.5 / 5
    3.3 / 5
    3.5 / 5
    4.5 / 5
    1.3 / 5
    1.3 / 5
    4.1 / 5
    4.4 / 5
    $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
    Ratings
    4 / 5
    3.8 / 5
    3.7 / 5
    3 / 5
    4.3 / 5
    3.5 / 5
    3.5 / 5
    3.3 / 5
    0 / 5
    0 / 5
    $10
    0.01 Lots
    1:1000
    ASIC
    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
    Ratings
    2.8 / 5
    3.8 / 5
    3 / 5
    3 / 5
    3 / 5
    1.3 / 5
    2.5 / 5
    2.5 / 5
    0 / 5
    0 / 5
    $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
    Ratings
    2.5 / 5
    3.5 / 5
    3 / 5
    3.3 / 5
    2.5 / 5
    3 / 5
    1.3 / 5
    1.8 / 5
    0 / 5
    0 / 5
    $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
    Plexytrade
    120% Cash Welcome Bonus
    Ratings
    1.5 / 5
    2.5 / 5
    2.5 / 5
    3.3 / 5
    2.5 / 5
    3.5 / 5
    0.5 / 5
    0.5 / 5
    4.8 / 5
    4.7 / 5
    $50
    0.01
    1:2000
    CFDs, Forex, Indices, Stocks, Commodities, Crypto
    MT4, MT5
    Bitcoin Payments, Ethereum Payments
    USD, EUR
    Go To Plexytrade

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

  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. 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. Capitalcore - The range of CFDs at Capitalcore is narrow, with 6 precious metals, 6 indices, and a slim suite of stocks. Notably, there are no commodities such as oil or gas and spreads vary greatly. Tiered leverage is available depending on the account, from 1:100 to 1:2000.
  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. Plexytrade - Plexytrade offers a modest selection of CFDs, providing opportunities to speculate on upward/downward price movements across 15 indices, 48 US stocks, 3 commodities, 4 metals, and 5 cryptos. The free margin calculator allows you to work out how much you need to put down to open and maintain leveraged positions.

CFD Commodity Trading Comparison

CFD Commodity Trading Comparison
Broker CFD Leverage Minimum Deposit Minimum Trade Regulators
Interactive Brokers logo
1:50 $0 $100 FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA, AFM
IG logo
1:30 (Retail), 1:250 (Pro) $0 0.01 Lots FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB, AFM
IQCent logo
1:500 $250 $0.01 IFMRRC
RedMars logo
1:30 (Retail), 1:500 (Pro) €250 0.01 Lots CySEC, AFM
Capitalcore logo
1:2000 $10 0.01 Lots IFSA
Videforex logo
1:500 $250 $0.01 -
xChief logo
1:1000 $10 0.01 Lots ASIC
Axofa logo
1:1000 $1 0.01 Lots SVGFSA
Sage FX logo
1:500 $10 0.01 Lots Pending
Plexytrade logo
1:2000 $50 0.01 -

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, AFM
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

  • While primarily geared towards experienced traders, IBKR has made moves to broaden its appeal in recent years, reducing its minimum deposit from $10,000 to $0.
  • With low commissions, tight spreads and a transparent fee structure, IBKR delivers a cost-effective environment for short-term traders.
  • The new IBKR Desktop platform takes the best of TWS while adding bespoke tools like Option Lattice and Screeners with MultiSort to create a genuinely impressive trading experience for day traders at every level.

Cons

  • 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.
  • 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.
  • 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

IG

"IG continues to provide a comprehensive package with an intuitive web platform, best-in-class education for beginners, advanced charting tools bolstered by its recent TradingView integration, 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, AFM
PlatformsWeb, ProRealTime, L2 Dealer, MT4, TradingView, AutoChartist, TradingCentral
Account CurrenciesUSD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD

Pros

  • As a well-established broker, IG operates under strict regulatory guidelines in multiple jurisdictions, maintaining a high level of trust.
  • 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, while IG has also added TradingView integration.
  • IG is amongst the best in terms of its range of instruments, which includes stocks, forex, indices, commodities, and cryptocurrencies, plus recently added US-listed futures and options, providing ample diversification opportunities.

Cons

  • Stock and CFD spreads still trail the cheapest brokers like CMC Markets based on tests.
  • IG has discontinued its swap-free account, reducing its appeal to Islamic traders.
  • 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.
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

  • IQCent is one of the few binary options brokers that also offers a copy trading service for hands-off traders
  • 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%

Cons

  • There's no automated trading support for algo traders
  • The broker is not overseen by a respected regulator, though this is common among binary options firms
  • IQCent trails binary brokers like Quotex with its narrow investment offering of around 100 assets with no stocks
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, AFM
PlatformsMT5
Account CurrenciesUSD, EUR

Pros

  • RedMars offers one of the best platforms for day trading, MT5, hosting 21 timeframes, dozens of analytical tools, flexible templates and algo trading
  • Getting started on RedMars is incredibly easy - you can be up and running in just a few minutes based on tests
  • 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

Cons

  • 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
  • The no-frills trading environment offers little beyond the basics, with no Islamic account, PAMM account or copy trading.
Visit RedMars
RedMars Review

Capitalcore

"The major selling points of Capitalcore are its high leverage options up to 1:2000 and zero commission or swap fees. However, its weak regulatory oversight from the IFSA and non-existent education place it far behind the top brokers."

Christian Harris, Reviewer

Capitalcore Quick Facts

Bonus Offer40% Deposit Bonus up to $2,500
FTSE Spread25
GBPUSD Spread0.5
Stocks Spread1.5 (Apple)
Leverage1:2000
RegulatorIFSA
PlatformsWebTrader, Pro
Account CurrenciesUSD

Pros

  • The Capitalcore platform provides comprehensive charting tools and a wide range of 150+ technical indicators, ideal for detailed market analysis.
  • Unlike most brokers, Capitalcore offers an unlimited demo account that takes under 5 minutes to open.
  • Capitalcore is one of the only brokers to charge zero swap fees, which may appeal to Islamic traders looking to comply with Islamic Finance.

Cons

  • The web platform was inconsistent during testing, with occasional technical glitches that meant the trading platform wouldn’t load.
  • Platform support is limited to proprietary software, so there's no integration with the market-leading MetaTrader or cTrader, which offer built-in economic news and support automated trading.
  • Capitalcore’s threadbare education and research seriously trail category leaders like IG, making it less suitable for aspiring traders.
Visit Capitalcore
Capitalcore Review

Videforex

"Videforex will serve traders looking for a no-frills, easy-to-use platform to speculate on the direction of popular financial markets through binaries. With a sign-up process that takes a matter of minutes and a web-accessible platform, getting started is a breeze. "

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

  • Videforex regularly runs trading contests, offering practice opportunities and cash prizes to beginners and experienced traders, with position sizes from just ¢0.01.
  • Traders can earn up to 98% payouts on 100+ assets with the broker’s binary options, bringing it in line with competitors like IQCent.
  • Videforex is one of the few brokers with 24/7 multilingual video support, providing comprehensive assistance for active traders.

Cons

  • The client terminal needs improvements based on our latest tests, sporting sometimes slow and unresponsive widgets which could dampen the experience for day traders.
  • Videforex lacks authorization from a trusted regulator, meaning traders may receive little to zero safeguards like segregated client accounts.
  • The absence of any educational tools is a serious drawback for newer traders who can find blogs, videos and live trading sessions at category leaders.
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
RegulatorASIC
PlatformsMT4, MT5
Account CurrenciesUSD, EUR, GBP, JPY, CHF

Pros

  • The broker offers a turnover rebate scheme geared towards active investors, as well as trading credits and several other occasional bonuses
  • The broker offers several account types to suit different traders, including a Cent account for beginners and pro-level hedging/netting accounts
  • xChief offers STP/ECN execution with low spreads from 0.0 pips and low commission rates starting from $2.50 per side

Cons

  • Fees and minimums are imposed on most withdrawal methods, including a €60 minimum for SWIFT bank transfers
  • The broker trails competitors when it comes to research tools and educational resources
  • 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

  • Low ECN spreads are available from 0.0 pips, plus reasonable commissions at $3.50 per side
  • Axofa offers the MetaTrader 5 platform which will particularly serve intermediate to experienced traders looking for advanced charting tools
  • The broker offers a range of local payment methods, especially for clients in Asia, as well as crypto deposits

Cons

  • 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
  • Our team found inconsistencies between international subsidiaries and website information
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

  • Low starting deposit from $10
  • High leverage up to 1:500
  • Fast withdrawal processing

Cons

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

Plexytrade

"Plexytrade is a newcomer in the brokerage scene with attention-grabbing features like 1:2000 leverage, zero spreads on select instruments and fast execution speeds of less than 46 milliseconds. However, the absence of regulation is a significant concern, while the non-existent research and educational tools place it far behind industry frontrunners."

Christian Harris, Reviewer

Plexytrade Quick Facts

Bonus Offer120% Cash Welcome Bonus
FTSE Spread0.8
GBPUSD Spread0.8
Stocks Spread5
Leverage1:2000
PlatformsMT4, MT5
Account CurrenciesUSD, EUR

Pros

  • There are various VPS packages starting from $50 per month, but they become complimentary once specific deposit thresholds are reached.
  • Plexytrade offers among the highest leverage we’ve seen, up to 1:2000, catering to advanced traders willing to forego regulatory protections.
  • Despite lacking regulation, Plexytrade provides negative balance protection and reinforces safety protocols by holding client funds in segregated accounts.

Cons

  • Plexytrade lacks regulation in major jurisdictions, significantly increasing the risks of opening an account and depositing funds.
  • With around 100 instruments, Plexytrade restricts the flexibility of investors who prefer to trade across various assets, especially compared to Blackbull with its 26,000 securities.
  • There are no social or copy trading features for inexperienced traders to replicate the trades of more experienced investors, trailing category leaders like eToro.
Visit Plexytrade
Plexytrade 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.