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CFD Trading on Commodities

Commodity Trading

Are you thinking of trading in the financial market but confused about the particular point to start? There are many things to trade in the financial market but have you considered CFDs? Well, CFDs is simply an acronym for Contracts for Difference; if you consider CFDs in terms of ability and cost in trading them anywhere, they have low barriers. Nevertheless, trading CFDs is somewhat abstract and technical. This means, most upcoming traders find it hard to where to start or what they entail. If you are in such a situation, don’t be frightened because this article is what you need to know everything about CFDs including how it works, the risks and benefits of trading them. Let us get the ball rolling.

What are commodities?

Normally, commodities are goods used in business. These commodities are of two types. Soft commodities are items, which are grown instead of mine. These include agricultural products like coffee, wheat, corn, sugar, etc. Furthermore, they are influenced by weather and climate changes. Alternatively, hard commodities are mined items, which include oil, diamonds, metals, etc.

What is CFD Trading on Commodities?

With this, I hope you have an idea of what CFDs trading on commodities entails. Well, the best way to understand what CFD trading is all about is to use a traditional investing example. Let us assume you want to invest in “XYZ” company, you have to buy the shares of the company at its current price. Peradventure, you want to invest in oil or gold for instance, you have to first buy the oil or bar and wait patiently for the price of the oil or gold to increase. With this increase, you can sell it at a higher price than the buying price to make a profit. CFDs trading involves buying commodities such as oil, diamond, metals, gold, etc.

Your CFD works exactly this way. First, you will open a trade on a particular asset under a predetermined price. Then, you wait for the price to either decrease or increase depending on the position you decide to make profit or loss. In as much as CFD trading is similar to our traditional investing, there is a thin line between both. Unlike the traditional investing where you own the asset, in CFD, you do not own the asset. Rather than this, the CFD reflects the underlying asset price.

How does CFDs Works?

Using terms such as underlying assets and contracts may sound confusing. Well, I won’t use any of such here. Trading CFDs gives you the prospect to collect profits depending on the direction of the market you enter. To begin, you have to:

  • Open a trading account through a reliable CFD broker
  • Download the software from the broker
  • Select the particular asset you want to trade
  • Decide if the price of the asset will rise or dip

With these four points, you can start making a profit in the CFDs market. For instance, the current price of gold was pecked at $1450 per ounce. And according to your anticipation, there is room for increase, so you decide to trigger a “buy” option through the broker’s software or platform. Don’t be confused when you hear trading going for a “long” trade, it simply means the same thing as a buy option. With this, you expect the price to go higher for you to close the trade with high profit.
Then, the trade you open, closed at $1560, your profit for this trade would be $110. This is a simple example, although there may be complicated trades involving calculation on profits and losses. Ironically, how profitable or unprofitable your trades will depend solely on the performance of the market.

Benefits of CFDs Trading

nterestingly, trading CFDs comes with both benefits and risk. The following are some of the benefits of CFDs trading.

  • No exchange fees – When trading CFDs, there is no need to acquire the underlying asset. An asset is just a contract between the trader and the broker
  • Leverage – This means you can buy larger assets with the little capital you have in your account. For instance, you have $2000 on your account with a leverage of 1:50, this means you can have access to $50 for each dollar you have in your account. Alternatively, for your $2000 account with 1:50 leverage, that would be $100,000
  • Nothing like expiration – The ideal of the market is that once there is a fall in the market, it is followed by a rise. This cycle continues, depending on your position in the market.

In spite of these benefits, you must understand that CFDs trading comes with risks. However, one important risk not to neglect is that when the market moves against your direction, you will lose money.

CFDs trading offers trader various opportunities to take part in the different market using the low deposit. Furthermore, the ability to utilize leverage can help amplify your profits. Additionally, you can choose to go long or short depending on the current market situation. However, there is also the likelihood of losing money, which is why you must constantly update yourself with every strategy available. With this knowledge and other reliable trading strategies, you can maximize your chance of profitability.

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Europe OfficeFOREX BIRDS LTD
Suite B2, 207 Regent Street, London, England, W1B 4ND

Having trouble? Find the answer to your query here. Don’t hesitate to contact us!

+44 745 232 030
support@forexbirds.com
Where to find usOUR LOCATIONS
http://forexbirds.com/wp-content/uploads/2019/10/unnamed-2.jpg
Global OfficeHEADQUARTERS
Suite 305, Griffith Corporate Centre,
P.O. Box 1510, Beachmont
Kingstown
Saint Vincent and the Grenadines
Global: +1 786 787 2648
Forexbirds Social linksFOLLOW US ON SOCIAL MEDIA
Taking seamless key performance indicators offline to maximise the long tail.

Forex Birds LTD is a registered company from UK company house registration number 11811390, Having registered office at Suite B2, 207 Regent Street, London, England, W1B 4ND.

License : Forex Birds LTD is a fully licensed and Regulated broker governed and supervised by the Saint Vincent Finance Service Authority (FSA) License No 25106 IBC 2018.

Risk Warning : Before deciding to participate in the FOREX, OTC & MM market, you should carefully consider your investment objectives, level of experience and risk appetite.

Copyright by Forex Birds Ltd. All rights reserved.

Copyright by Forex Birds Ltd. All rights reserved.