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How Are Commodities Traded In Simple Terms


The lookout for how are commodities Traded is as old as the financial market itself. Perhaps commodities trading is even older than the financial market. The first commodities trading exchange dates back to 1530 in Amsterdam.

Today, you can trade commodities from the comfort of your home or office with a click of the mouse. Commodities trading is basically the buy and sell of various commodities such as oil and gas, cocoa, coffee, sugar, wheat, and metals like gold and silver.

In this guide, we will dissect everything you need to know about commodities trading - from the types of commodities, why trade commodities, to how are commodities traded, and the most actively traded commodities on the market. 

What are Commodities? 

Commodity futures contracts of CFDs on Commodities can be considered as financial instruments. Most commodities come from the earth, and they possess uniform quality. They are usually produced in large quantities by different producers. Examples include oil, precious metals, corn, cotton, gas, wheat, oranges, and uranium. Generally, commodities are the raw materials needed by industries to produce "finished" foods that we consume today. 

Types of Commodities 

Commodities are grouped into three classes. Below are the three classes of commodities: 

Why Trade Commodities?

While commodities do not pay dividends like stocks, they can protect you against inflation. Commodities prices tend to skyrocket the moment economies experience inflation. The startup cost of trading commodities is very minimal. The requirements are a laptop or a smartphone, a strong internet connection, and as little as 215 Euros. With a mobile app, you can buy or sell any commodity of your choice right from your phone. 

How Are Commodities Traded with CFDs? 

Curious about trading CFDs on commodities? Then follow the steps below:

Popular Commodities to Trade 

As thebalance.com states, in no particular order, the following are the most actively traded commodities: 

About ROinvesting and advantages of trading commodities with us 

ROinvesting is a leading online broker with thousands of traders on our membership base. Our mission is to create a community of investors where each investor will have better tools to make a trading decision with confidence. Here is why today's investor prefers our trading platform over others: 

How Are CFDs on Commodities Traded on our Platform? 

Trading CFDs on commodities on our platform is simple and hassle-free. Our trading platform is user-friendly and equipped with features that will easily let you trade on the commodity market. 
If you are passionate about trading CFDs on commodities on our platform, here is how to go about it: 

Frequently Asked Questions 

What are the best commodities to trade?

As an investor, you should only trade a commodity you understand better so that you won't lose your trading capital. You can acquire knowledge about any commodity from researching about the commodity itself. 

 Benefits of trading commodities with CFDs? 

Before the introduction of CFDs, the traditional way of trading commodities was the use of futures contracts. The problem with using futures contracts was that not many traders have futures trading accounts, plus, the trading capital was huge and must be made available upfront. However, these problems can be completely avoided when you trade commodities with CFDs. With CFDs, liquidity is not a problem, and you can start trading with a little capital due to leverage. Leverage can increase potential profits but equally increase losses. 

Is it possible to trade commodities online? 

Of course, in the 21st century, commodities are now traded online. All that you need is a trading account with an online broker, a trading device, a strong internet connection, and a good trading knowledge. 

Final Thoughts 

Commodities can be an excellent addition to your trading. Aside from potential earning returns from commodities trading if the market goes your direction, it is also a way of diversifying your investment to mitigate the risks of losing your capital. With the right knowledge and trading tools, you can start exploring the commodity market.

Thankfully, if you are trading with ROInvesting, we have all the tools to get you started. Importantly, before you start to trade CFDs on commodities with a live account, ensure you understand the commodity you are pushing for. Plus, use a demo account to feel in real-time how the market operates. You can access our demo account to achieve this. 

In summary, this article has covered the following crucial areas of commodities trading: 

#source


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