Commodities Trading

4.9

Best broker

SUMMARY

4.5/5
Commodities are raw materials or products such as coffee or sugar, are vital assets of the world, and can be traded. Experienced traders know that diversifying their portfolio will allow for the most significant monetary gains, which is why many turn to commodity stocks. Those who are interested in commodity stocks can get involved by investing in the physical commodity itself or purchasing shares from within the commodity company. Before considering commodities, one should consider the risks and benefits. There are a couple of benefits associated with commodity stocks, such as the increased demand for them when there are times of high inflation, and commodity prices often rise when the USD declines. The demand for commodities is strong, and again, it’s a way to diversify one’s portfolio.
Of course, there are also risks associated with commodities trading as all stocks come with some form of risk. One of the most significant risks is volatility, which is much higher than other types of investments. Another risk is that the trading is speculative, so it can be challenging to make predictions and plan trading outcomes. If this has sparked your interest, then you may be wondering more about the commodity market and how to trade commodities. The purpose of this article is to review a platform called “Commodities Trading,” which is a platform embedded within IG. IG was founded in 1974, is involved in 17,000 + markets, and serves over 239,000 users throughout the world. In addition to hosting commodity trading, the platform also hosts many other trading opportunities such as Forex and cryptocurrency.

Fees

4.5/5

Creating an IG trading account is free, and there are minimal fees associated with executing trades which makes IG an attractive broker option. IG makes a majority of its money through spreads. When users buy at a specific price and sell at a different price, the difference between these two units is called a spread. Fees are extracted from these spreads. Other than these spread fees, users may also be charged if they leave trades in the market overnight or if they are inactive for an extended period of time. There are also fees associated with contracts. For example, the value of a contract for spot gold is $100 USD, which results in a spread of .3; the margin per contract is .5%. IG does an excellent job of breaking up all of its charges on its main webpage.

Account Opening

4.5/5

Opening an account is simple with IG. You will have the option to create a demo account first or go right into the live version of the account. We always recommend taking advantage of the demo account because it’s free and it’s great practice. When you go to the demo account creation page, you will be asked to come up with a username, password and provide your name, country of residence, phone number, and email address. IG is available in over 100 countries, so findings your location on the list shouldn’t be an issue. Once you’ve finished signing up for the demo account, you’ll be granted access to the platform with $20,000 in virtual funds. You’ll also have access to educational content to help you refine your strategy and familiarize yourself with commodities trading. The demo account will be available as long as you have virtual funds in the account. Once those have been used up, you’ll no longer have access to that account and will be transitioned to a live account.

With many commodities and options to choose from, you may be wondering how to proceed when you enter the live account. You can choose your position in three easy steps:

  1. Choose a commodity such as gold or oil, or you can select commodity-linked stocks or ETFs.
  2. Choose whether to go long or short.
  3. Start trading!  

Consider the categories of commodities, commodity stocks, or commodity ETFs. Commodities can be “hard” or extracted directly from the earth. Examples of hard commodities include gold, oil, copper, and natural gas. On the other hand, commodities can also be considered “soft” or harvested from the earn. Soft commodities include coffee, wheat, lumber, or livestock. Commodities can also be categorized into energies, metals, agriculture, or livestock. It’s important to consider what category commodities fall into for trading purposes. Commodity stocks are indirect commodity tradings because you would be buying and selling shares of a commodity manufacturer. If you are considering commodity stocks, take note of the relationship between the stock and commodity. In some instances, the stock price does not run parallel to the commodity price, so it’s important to make sure you have an understanding of that relationship. Commodity ETFs are investment instruments that hold assets. 

Once you’ve determined how you will trade commodities, consider what makes a commodity’s price move. There are five factors that can cause shifts in commodity prices such as competition, politics, macroeconomics, seasonality, and weather. All of this information is presented on the live stream within the IG platform, but it’s still essential to have a thorough understanding of how prices shift so you can more accurately predict movements. Some factors that can cause shifts in commodity value are predictable, such as seasonality. Of course, some things are unpredictable, like how the weather will be, but it’s still important to understand these relationships. 

Another important consideration for novice commodities traders is to understand how commodity trading works. There are five trading methods, including trading commodity futures, trading commodity spot prices, trading commodity options, or trading or investing in stocks and ETFs. When trading commodity futures, the trader will have a contract that is set to exchange an asset for a fixed price in the future; this method is a prediction game. Trading commodity spot prices reflect what the commodity is worth right now, so it’s more of an immediate trading execution. Trading commodity options provide traders with the opportunity to trade at a set price on a set date, but traders are not obligated to execute the trade, which is the opposite of contract trading. Trading in stocks and ETFs allows traders to choose whether they wish to go long or short with their trade. There is no preferred way of trading; all of these options are valid and can result in gains. When choosing how to trade commodities, consider your comfort level and familiarity. The stock industry includes a lot of technical jargon, so going with a strategy that is full of terminology you are unfamiliar with may not be best. Moreover, you can pick and choose one or multiple trading options, so you are not married to a single option.

Deposit & Withdrawal

4.5/5

As with all trading platforms, you are required to make a deposit because that’s how you initiate trades. The minimum deposit requirement is $300 USD or the equivalent in other currencies. The maximum deposit is $99,999, and this must be made with a debit card. Otherwise, the maximum deposit is $50,000 by credit card. A $300 minimum deposit can seem daunting, especially because other platforms that we’ve reviewed have required far less initially. However, IG is a reputable broker, and they are committed to their users’ success. Further, you do not need to execute a single trade worth $300 immediately; you can use the $300 to execute multiple trades on various commodities or trading options. In fact, we recommend that you split the $300 up to execute numerous trades because that method will give you better odds at success.

Trading & Platform

4.5/5

Commodities trading is housed within the broker IG, which is a well-known and trust broker. IG allows for online commodities trading, which will enable traders to execute transactions from the comfort of their homes. There are several reasons one should consider this platform for stock market commodity trading:

  • The platform offers 35 different commodities.
  • Capital is secure to minimize risk.
  • There are live feeds for users to get up-to-date information on the market.
  • CFDs are available for short-term profits.
  • The platform offers low spreads for traders to get the best commodity prices. 

In addition to the multiple benefits, IG also has several options for traders. IG allows for several markets to be traded within, such as spot prices, options contracts, shares, and ETFs. Traders can go long or short on the market prices. Also, the fees are minimal such that CFDs are subject to a commission, and all other commodity markets fees are collected via the spread. Finally, the platform is available via mobile app or the web, which allows flexibility and control in trading. 

As aforementioned, IG includes a web-based platform and a mobile-based platform that allows for trading anywhere. IG also includes MetaTrader4, a platform with 24/6 support and leading technology for commodities trading. MT4 has numerous state-of-the-art features such as thousands of market indicators, automatic trading, custom charts, and it has a software feel providing seamless usability. MT4 is available within the demo account, so users are welcome to familiarize themselves with the state-of-the-art platform before executing live trades. 

An additional feature included within IQ is knock-out trading, which provides novice users with minimal risk trading. Knock-outs allow users to set their target gain and will automatically close out the trade when that target is met. The knock-out trading feature enables users to hold their commodities’ value falls to prevent significant risk. 

With all of the mentioned features, track record, and customer service reports, we fully support IG as a platform for executing commodity trades. The platform is a licensed broker and is dedicated to its users’ success. We recommend checking out their website as there is much more information than what we covered in this article alone. 

As always, happy trading, friends! 

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