Trading Commodities in 2018

No doubt, as an experienced investor and trader, you've come across commodities. Ever wondered what they're about, how to trade them, and how to get started? Read on to learn more.

What are commodities? How does commodity trading work?

Commodities are basic goods such as lumber, steel, oil, and so on. These are typically used as inputs for production of other goods such as furniture, machinery, vehicles, and more.

In trading terms, commodities are the "same", even if they are created by different producers. There is less variation in specifications, because these are often raw materials, as compared to vehicles or computer parts.

Much like stocks and currencies, commodities can be traded on centralised exchanges such as the Chicago Mercantile Exchange. Commodity trading usually takes place through futures contracts, which essentially means that you would be trading the contract, whose value is derived from the value of the underlying asset (the commodity).

Contract sizes are often standardised by quantity and the minimum quality of the commodity to be traded under such a contract. Through this arrangement, it becomes feasible to trade commodities and make profits or incur losses on price fluctuations, because the goods do not need to physically change hands.

“2018 could be an interesting year for trading commodities, given the recent price trend and potential for more volatility.”

What is the 2018 outlook for commodities?

After years of depressed prices since 2014, commodities such as oil have started a journey towards recovery. At its lowest point in recent years, WTI Crude Oil fell to a low of USD 27.25 a barrel in January 2016, down from USD 105.72 at its peak in June 2014.

Now, in Q2 2018, WTI Crude Oil has hit USD 70.00 for the first time since 2014. Oil prices have been on an uptrend since early 2017.

In addition, recent geopolitical events such as a potential trade war between the US and China has created uncertainties resulting in greater market volatility.

2018 could be an interesting year for trading commodities, given the recent price trend and potential for more volatility.

How to Start Trading CFD's on Commodities

Simply sign up with a broker that offers CFD's on commodities on their platform, and you can get started right away.

It is also recommended to find a broker that has negative balance protection, given the more speculative nature of commodities CFD trading. This is especially important if you want to trade with leverage, which increases your reward and similarly increases your risk.

Plus500, licensed and regulated by the Monetary Authority of Singapore (License No. CMS100648-1) and Enterprise Singapore (Licence No. Plus/CBL/2018), is a broker that provides this negative balance protection and more.

As a leading provider of CFDs, Plus500 is well-equipped to provide you with easy access to your preferred trading instruments. Furthermore, Plus500 provides an unlimited demo account for traders to use until he or she is ready and prepared to trade with real money. So, if you're thinking of getting started, sign up today!

For more information, please visit https://www.plus500.com.sg.

Note: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.

 

About Plus500

Plus500 is a leading provider of Contracts for Difference (CFDs), delivering trading facilities on shares, forex, commodities, ETFs, options and indices, alongside innovative trading technology. Plus500SG Pte Ltd (UEN 201422211Z) holds a capital markets services license from the Monetary Authority of Singapore for dealing in securities and leveraged foreign exchange trading (License No. CMS100648-1) and a Commodity Broker's License (License No. PLUS/CBL/2018) from Enterprise Singapore. The company currently offers a portfolio of over 2,000 instruments. Plus500SG Pte Ltd is a subsidiary of Plus500 Ltd, a company listed on the AIM section of the London Stock Exchange (LSE).

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