- Commodity Trading
Commodity Trading
Currently CFD trading becomes increasingly popular. This kind of trading has a number of advantages against traditional commodity market trading. IFC Markets offers its Clients large number of commodities that can be traded through CFD.
What Is Commodity Trading?
While using the term Commodity trading, as a rule the exchange trade of commodities is meant. The peculiarity of such commodities is the standard quality of consumer properties, interchangeability, ability to be stored, transported, as well as ability to be divided into smaller sets. This kind of commodities are easily interchangeable (or qualitatively uniform), and practically the place and time of production is of no importance (oil, grain, copper, etc.) Usually, the trade of such commodities is concentrated on commodity exchanges. An important feature of commodities is the pricing mechanism. Conditions for perfect competition are formed on the exchange. The price of goods depends primarily on the global supply and demand.
Commodity Trading: Commodity Types
About 20% of global trade is conducted on the exchanges. All commodities are divided into groups, such as energy raw materials (oil, petroleum, fuel oil, etc.), precious and non-ferrous metals (copper, nickel, gold, silver etc.), grains (wheat, corn, rice, etc.) and others.
The largest exchanges are Chicago Mercantile Exchange, Chicago Board of Trade, London Metal Exchange, New York Mercantile Exchange.
There are two types of deals conducted on commodity exchanges:
- Deals for real goods;
- Urgent (futures) deals.
Deals for real commodities are completed by delivery and reception of the real commodities on one of the exchange warehouses. This means that the seller has to physically have the commodity and put in the time specified in the contract.
What Are Peculiarities of Commodity Trading with Futures Deals?
Futures deals do not require obligations of immediate supply of real commodities but suggest the buy and sell of the right for the commodities. Futures contract may be annulled by making an opposite transaction with equal quantity of the commodities or by on time delivery of the mentioned commodities according to the contract. Futures contracts are subdivided into deliverable and settlement contracts. For deliverable contract the seller delivers the commodities at the time specified in the contract, and the buyer pays the contract. For the settlement contract buyer does not expect to get the commodity and the seller - to transfer it. The result of such deals is not the actual transaction, but the payment or receiving of the difference between the prices of the contract on the day it was signed and was executed. By making deals on the market the participants may have the following goals: buying/selling the real commodities, conducting speculative operations, hedging (insurance against the possible price change).
IFC Markets is a leading innovative financial company, offering private and corporate investors wide set of trading and analytical tools. The company provides its clients with Forex and CFD trading through its own-generated trading platform NetTradeX, which is available on PC, iOS, Android and Windows Mobile. The company also offers MetaTrader 4 platform available on PC, Mac OS, iOS, Android, Windows Mobile and Smartphone. You may compare the advantages of both platforms.