How To Invest In Commodities? CFDs On Commodities Trading
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Ways to invest in commodities
CFDs allow you to trade commodity or stock futures in real time using leverage. CFDs give you the opportunity to trade commodities not only when prices are rising (BUY position) but also when they are falling (SELL position).
Leverage allows you to open relatively large positions in relation to the capital involved. However, keep in mind that leverage increases both potential profits and possible losses.
Commodities can be divided into several different groups, each with different economic uses, risks and growth prospects.
The XTB trading platform offers CFD trading on commodities such as:
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Energy (e.g. WTI or Brent crude oil , natural gas, gasoline or diesel)
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Industrial metals (e.g. aluminum, copper, zinc)
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Precious metals (gold, silver, platinum, palladium)
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Agriculture (wheat, soybeans, cocoa, corn, coffee, soybean oil or cotton) And much more.
Trading with CFDs on commodities is:
- Trade in the prices of goods without their physical delivery and without leaving home;
- Access to thousands of leveraged instruments, including contracts for commodities such as crude oil, natural gas, gasoline, copper, gold and silver;
- Ability to conclude transactions also from the mobile application;
- Dozens of indicators and advanced chart editing options to aid market analysis;
- Possibility to open positions for both up and down price movements (BUY and SELL);
- Possibility to open larger positions with relatively small capital involvement;
- The ability to define defensive orders such as Stop Loss , Take Profit and Trailing SL, which allow you to properly manage your trades.
However, it should be remembered that trading CFDs is associated with high risk, as investing with the use of leverage can increase both potential profits and possible losses, and the specificity of these instruments is also not conducive to long-term investments. It is also worth noting that when buying a CFD for a given asset, the investor does not become its owner (as is the case with the purchase of shares, ETFs or physical commodities), but only speculates on its price movements.
Actions
Commodity stocks are becoming more and more popular, and rising commodity prices and supply problems are driving up their valuations. Large investment funds, such as Berkshire Hathaway owned by Warren , are also interested in shares of companies from this sector Buffett , who bought shares in Chevron and Occidental Petroleum in 2022. Due to the deepening energy crisis in Europe and the suspension of oil supplies from Russia, Cheniere Energy, the leading American LNG supplier, recorded above-average profits.
In addition, thanks to the return of positive sentiment towards nuclear power, we have seen uranium prices increase from suppliers such as Cameco (CCJ.US) , Kazatomprom (KAZ.UK) and Uranium Energy Corp (UEC.US) . Of course, this is only a fraction of the information from the entire commodity market, the list of news that circulated the industry and caused unusual volatility in 2022 is very long.
ETFs
ETFs (Exchange- traded funds ) allow you to diversify your investment portfolio and provide exposure to listed companies in a selected commodity sector. Due to the specificity of this type of assets, their price volatility is usually much lower than that of shares of individual companies. We also provide ETF CFD trading, allowing you to bet on the ups and downs of selected funds and industries, including fuels, renewable energy, natural gas, copper and zinc, and precious metals suppliers.
Investing in "Physical Commodities"
In the past, the physical form of investing in commodities was the only possible option to participate in this market, but it caused a number of different problems. These include problems with the storage and transport of purchased goods, as this usually requires appropriate infrastructure, as is the case with oil or natural gas. In addition, the trading of physical goods often involves problems with the liquidity available in the market, which significantly hinders the efficiency and speed of purchase or sale transactions. In the case of currently available options for exposure to the commodity market (i.e. CFDs, shares of listed companies or ETFs), this problem does not occur, which makes them a much more interesting form of investment.
