Commodities Trading

A Trader predicts that the US crude oil market will drop due to a strengthening dollar and decides to sell 10 CFDs of USOil at quote 95.76 / 95.81.

Later in the day, improving economic data out of the US sees the dollar rally, and the market performs per the trader’s expectation, with their short USOil trade coming onside, the market dropping 50 points!

Deciding to take their profit and close out, the trader checks the quote 95.21/95.26, buying 10 CFDs of USOIL.

Since you sold at 95.76 and then bought back at 95.26 this represents a 50-point difference. As a result, the trader would receive a win fall of $500 [(95.76 – 95.26) x 10 CFDs].

Always apply risk management tools to limit your risk when trading.


Benefits of Trading Commodities

Commodity CFDs are a new and easy way to trade commodities markets. Offering traders direct exposure to the underlying commodity, Tradenext’s Commodity CFD offering makes investing in oil, silver and gold as simple as trading any other CFD products. With all the features commonly associated with CFD trading, Commodity CFDs represent a simple alternative to trading commodities on the Futures exchanges.

Trading on the Futures exchanges can, on occasions be expensive, with lot sizes and high collateral requirements restricting the trader's ability to participate in a trade. Commodity CFDs enable investors to employ leveraged commodity trading with reduced collateral.

Commodities are widely traded through CFDs as an alternative to the logistical problems and costs involved with straightforward commodities acquisition.

The market for gold has been particularly strong during the recent banking crisis, with trading institutions seeking to move away from volatile stocks into more stable gold reserves. Likewise, in periods of rising inflation trading portfolios can actually see growth where others might falter, leaving commodities exposure to act as a form of hedge against wider economic movements. With investors coming out of other asset classes such as conventional equities in recent years, commodities have been a particular beneficiary with trading in gold and silver proving more and more popular.

The main advantage of trading commodities with CFDs is the lower cost to entry barrier. The leveraged nature of trading contracts for difference makes it possible to take both long and short positions with just a fractional margin requirement. In other words, this means traders can take on a bigger exposure to a commodities position than may otherwise have been the case, often requiring as little as 1% to cover the margin requirement.

Benefits of trading commodity CFDs

  • 1% Margin - This equates to 100:1 Leverage (also, we offer flexible margins which are bespoke to the client)
  • Smaller lot sizes compared to futures for increased flexibility and lower capital requirements
  • One-click trading on oil, gold and silver – quick execution
  • Easy portfolio diversification and hedging opportunities (for example, going short as a hedge against physical commodities)
  • No commission on Commodity CFDs
  • Short selling available

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