CM Trading Commodity Trading Guide

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Commodity trading guide: Learn how to trade commodities in 2020 Commodity trading has been gaining increased momentum among traders and financial institutions due to the high intraday opportunities it provides. Below we will provide an overview of commodity trading and how you can take advantage of this asset class to diversify your portfolio. What are commodities Commodities range from precious metals such as gold platinum silver and palladium to energy sources such as oil and gas. Agricultural commodities are also highly popular in online trading and these include coffee sugar wheat and corn. Commodity trading has become widely accessible in recent years due to CFDs Contracts for Difference which allow for buying and selling these assets online in order to profit from their intraday price fluctuations. The global economy heavily relies on these valuable assets as they literally provide the fuel that drives the developed world. For example you may already be keeping an eye out for changes in oil prices due to how it may affect your monthly gas expenses however fluctuations in oil prices can profoundly impact the daily operation and revenue streams of thousands of companies in a variety of different industries across the world. Countries with an economy that depends on the export of their commodities typically benefit from an increase in commodity prices however it’s worth pointing out that a price hike can also translate to reduced demand. On the other hand economies that rely on the import of raw materials and commodities from their trade partners will welcome a decrease in prices as it will reduce overall costs.

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What affects commodity prices While trading commodities can be highly profitable it’s worth noting that they entail a certain degree of risk due to the fact that the value of commodities is highly vulnerable to external factors such as natural disasters diseases and other geopolitical events and developments. These events can be highly unpredictable and can directly impact the supply and demand of commodities on the world stage. In fact the forces of supply and demand are a highly important aspect in the fundamental analysis of a commodity’s price. If production of a commodity runs uncontrolled and inventories start piling up then the increased supply will eventually drive prices down. Similarly when a natural disaster such as a storm interferes with the supply chain the reduced availability will lead to scarcity which generally translates to increased prices across the board. Another factor that can have a major influence in the price of commodities is the traders and speculators themselves. This is particularly true for technical traders who monitor the charts for opportunities based on price action patterns such as support and resistance. Since technical analysis is a highly popular approach of determining entry points in the market and the majority of traders rely on the same technical indicators to plan their trades a vast number of traders that buy or sell at a specific price point are likely to influence the overall market direction. Commodity trading advantages Trading commodities with a forex broker is both straightforward and cost-effective due to the use of leverage no commissions and low barrier to entry. Commodity traders also get access to a diverse range of tradable assets each with its own unique advantages and disadvantages. Gold for example is one of the most

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widely traded commodities in the financial markets because of its inherent stability and growth over time. Gold is also considered a safe-haven investment as it tends to appreciate in value even during times of economic crisis and uncertainty. When the economy is facing a downturn investors prefer stable assets that are more likely to retain their value compared to the more volatile stock and currency markets. How to trade commodity CFDs CFD trading allow traders to speculate on commodity prices and realize substantial returns regardless of market direction or initial investment amount. Utilizing the powerful leverage that comes with CFD trading commodity traders can enjoy greater returns quickly and efficiently. For example opening a 1 lot buy position in gold XAU/USD at the price of 1671.20 which was the average going rate on the 5 th of June 2020 and closing the trade at 1713.04 on the 8 th of June 2020 – we would realize a profit of approximately 4184. Admittedly it’s important to note that if the price of gold didn’t move to the upside or we didn’t manage to close the trade while the price was ranging higher than our entry point – this trade could have resulted in a loss instead. This is why it’s always important to make use of a risk-management strategy and protective stop loss orders available in the platform at all times. However as already stated CFDs allow traders to profit even if the prices are moving downward as well. Using the same example as above if the price of gold moved in the opposite direction and dropped from 1713.04 to 1671.20 traders with sell positions would enjoy an equal profit of 4.184. Why trade commodities with CM Trading CM Trading provides clients with access to a wide range of tradable commodities with 50:1 leverage ratio with the exception of gold and silver which offer 100:1.

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Trade the following commodities: • Gold silver platinum copper and palladium • Corn wheat coffee and sugar • Gas Crude and Brent oil Aside from the superior trading conditions available exclusively to CM Trading clients we also provide comprehensive trading education for traders of all skill levels through our weekly online webinars and workshops. Each client receives a customized education package with learning resources covering the basics of trading the markets as well as advanced tips and strategies. For further information and guidance clients can get in touch with their personal Trading Specialist to receive daily updates on the most favourable assets of the day and discuss risk appetite and profit targets. Just click the button below to open your account and we’ll help you get started in the exciting world of commodity trading today. Register now

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