Commodities (Gold & Crude Oil Trading)

Commodities are the basic primary goods that form the foundation of our economy. They can be separated into four distinct categories: metal, energy, livestock and meat, and agriculture.

Raw materials like crude oil, natural gas, gold, and silver are all commodities, while gold and crude oil are most commonly traded. These commodities are typically in high demand and consequently hold their value at all times. However, oil in particular is susceptible to rapid fluctuations caused by international political events, and this makes it a popular choice for traders.

Diversify your portfolio: Trading commodities is a good way to hedge against your stock and bond investments

High growth opportunities: The commodities market is very dynamic, meaning there are lots of opportunities for rapid growth

Provide some security against inflation: With some commodities in your portfolio, you’ll be well placed to benefit from a market upswing

A CFD (Contract for Difference) is a financial product that allows you to speculate on future changes in the market. There are all sorts of CFDs available for the commodities market.

You might take a CFD on the spot price of a commodity, like gold, which is the currently quoted price, or you can choose to trade a CFD based on the gold futures price. Typically, there are standard sizes of contract such as 10 ounces or 100 ounces of gold, and also mini contracts for 1/10 of the standard size. CFD investors never take ownership of the commodity itself.

No matter the kind of CFD you take, or the size of the contract, your return will depend on the change in the value of your chosen commodity. And, as with all CFDs, you can trade on margin, which may be as little as 3% of the value. If you trade on 1:10 leverage, you only need to invest 10% of the asset value. Typically you’ll be charged overnight interest for every day that you hold the CFD as if you had borrowed the money from the broker to buy the full quantity.

Kicking off your commodities journey is easy with the help of ZFX.

1. First, you need to register for a trading account. You can do this online, and the process only takes minutes.

2. Once you’ve added your personal information and verified your identity, you’ll need to deposit some funds to start trading with. The minimum deposit varies depending on the account you choose ($50 is the minimum for a Mini Trading account).

3. After successfully injecting some capital into your account, you’re ready to trade! Simply download the ZFX MT4 trading platform and get started on the commodities market.

Typically, you can trade commodities like gold and silver by using CFDs or Futures. Both of these financial products are derivatives, which allow you to speculate on the future price of the commodity without taking ownership of the good itself.

Futures are a contract where one party binds themself to make or take delivery of a pre-determined quantity and quality of a good on a set date at an agreed price. It’s very unusual for parties in this future to ever take or make physical delivery of the good in question — it’s more about the promise. Futures are traded on margin, and they’re heavily pegged to the price of the commodity, making them hugely volatile with a high risk/high reward investment.

CFDs, on the other hand, are a theoretical order to buy or sell a certain amount of gold, and the profit or loss on the CFD is determined by the fluctuation in the price. Trading CFDs is extremely popular, partly because they’re so liquid, meaning you can enter and exit positions quickly, even if you’re taking a very large position.

When it comes to commodities, timing is everything. You can conduct trades on an almost 24/5 basis, with a two-day break from Friday afternoon until Sunday morning. The markets open and close in each location across the world according to local time zones. They generally open around 9:30 am local time and close at 4:30 pm.

However, each market experiences a ‘busy’ period, when traders of all types rush to close out existing positions and enter new ones. This means liquidity increases, creating an array of strategic trading opportunities. The busy period normally occurs in the last half hour before the day closes.

The commodities market can seem intimidating. But at ZFX, we go the extra mile to provide training resources to help traders of all levels perform at their best in this market.

For new traders, we recommend utilizing our demo account. This is a free way to practice trading, and it’s totally risk-free.

On top of this, there is a range of trading tutorials on our website — and these are valuable even for experienced traders who want to refresh their skills.

Plus, our trailblazing MT4 trading platform comes with advanced analytical tools and indicators that will help you with all your technical analysis, so you can learn as you trade.