Commodities trading
Why trade commodities with famous worldwide trading?
Below are our contract spreads for CFDs and MT5. Download MT5 to get faster execution and greater automated trading (only available for gold and silver).
|
|
CFDs | MT5 |
|---|---|---|
| Spot Gold | 0.3 | 0.3 |
| Spot Silver (5000oz) | 2 | 2 |
| Oil - US Crude | 2.8 | 2.8 |
| Oil - Brent Crude | 2.8 | 2.8 |
| Chicago wheat | 0.6 | n/a |
| London sugar | 0.6 | n/a |
The new way to trade commodities
Our new commodity product enables you to take a short-term view on 26 key commodity markets.
The new offering works in the same way as an index CFD. And just like an index position, you’ll pay a funding
charge for holding your commodity position overnight.
As there are no fixed expiries, we are also able to offer continuous charting on these markets. This means your
technical analysis will be available as long as you want it. We have used past data to backdate our charts for
the last three to five years, so you can get an accurate historical look.
How do we make our prices?
In the absence of a continuously traded underlying market, we have created an algorithm to derive a price from
the forward curve of each commodity. It will automatically calculate and apply day-to-day funding requirements.
To price these markets we use two futures contracts on the underlying commodity. For each market we look at the
contracts that have sufficient liquidity, then use the two with the nearest expiry dates.
The one that has the closest expiry date is called the front month contract, and is labelled ‘A’ in our
diagram. The one with the second-nearest expiry date is called the back month contract and is labelled ‘B’.
As soon as the previous contract expires, the price we offer is equal to the price of ‘A’. When ‘A’ expires,
‘B’ becomes the front month contract, and our price is equal to the price of ‘B’.
In between these two expiry points, our price gradually moves from the price of ‘A’ towards the price of ‘B’.
Depending on the commodity, the price of ‘B’ can be higher or lower than the price of ‘A’.
Overnight funding charges for these markets reflect one day's movement along the forward curve from the price
of 'A' towards the price of 'B'.
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New to commodities trading?
Commodities are the basic building blocks of the global economy. They are natural resources traded on dedicated
exchanges around the world.
There are two types of commodity – soft and hard. Soft commodities are typically agricultural like wheat or
sugar, whereas hard commodities are metals or energies like silver and gas.
The production and consumption of commodities depends on many factors, including:
- Supply and demand
- The weather
- Economic and political events
- The US dollar (commodities are normally priced in the US currency)
As a result of all these factors, commodity prices can fluctuate significantly.
How and where commodities are traded
Commodities are traded on a number of exchanges that specialise in particular markets.
Commodities are also generally traded as futures contracts. These are simply agreements to trade an asset at an
agreed price and date in the future. This enables you to trade the contracts themselves without ever having to
own the underlying asset.
How does it work?
See commodities example below: