Commodities trading represents the buying and selling of set quantities of assets. E.g, Crude Oil and Gold. Commodities trading is typically dominated by energy and metals. Price movements in commodities are usually seen as indicators for the economic health of the wider industry that supplies and demands them.
At CMG FX you can trade CFDs on a wide variety of global commodities including gold, silver and oil, all with a trusted broker headquartered in Australia. You can enter and exit trades whenever you want to, close to 24/5, across almost all commodities markets.
At CMG FX we offer CFDs on our MT4 & MT5 platforms to trade commodities. This form of trading allows you to speculate on the changing prices of commodities without owning the physical commodity you’re trading. Essentially, a CFD is a contract between the trader and the broker. For example, if you opened a long (buy) CFD trade on Gold when it was valued at $1,505, and you closed the trade when the price rose to $1,525, you would make a profit $20. If the price fell to $1,500, you would make a loss of $5. In basic terms, you are paying or receiving the difference between the opening and closing price of the commodity being traded.
A History of Commodities TradingThere are traces of commodities trading as far back as ancient China and 4500 BC where the Sumerians (modern day Iraq) used jugs filled with clay tokens that were shaped to represent the animal or crop they had in their possession. This evolved over time until 1611 when the Amsterdam Stock Exchange was created. It was the world’s first stock exchange and was originally a market for commodity exchange.
The most significant development in commodities trading occurred in 1848 when the Chicago Board of Trade (CBOT) was set up. Its regulated structure provided the exchange of futures and options contracts. Commodities exchanges are now located worldwide with some specialising in multiple commodities or a lone material. Major commodity markets include the Chicago Mercantile Exchange (CME), New York Mercantile Exchange (NYMEX), London Metal Exchange (LME), the Multi Commodity Exchange of India Ltd (MCX) and the Australian Stock Exchange (ASE).
Relates to major crops and livestock which are in high demand. This includes wheat, rice, corn, coffee, sugar, cotton, oats, soybeans, live cattle, eggs and more. They play a pivotal role in the economy, especially in developing countries which rely heavily on agricultural exports for their economic growth and development.
One of the most interesting characteristics of the commodities market are the factors which impact pricing. Directly related to supply and demand, these include adverse weather conditions such as natural disasters and severe climate changes.
The ability to access commodities using online trading platforms has allowed individual traders to benefit from them. Commodities are often utilised for portfolio diversification as they are generally negatively correlated with stock prices. They are also considered to be an excellent hedging tool against inflation as commodity prices rise when inflation is accelerating. Similarly, many traders invest in commodities to hedge against geopolitical uncertainties such as wars, political events and trade agreements.
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