Commodities Trading

Trade Commodities Using MT4

Commodities trading is a popular way to invest and to participate in one of the most liquid markets in the world – the commodities markets.

At Synergy FX, you can trade a range of commodities and access leverage up to 400 to 1.

You can trade precious metals such as gold, silver and crude oil across two different trading products that will match individual trading styles and experience levels.

Trading on commodities is a good way to diversify your portfolio as commodity prices are generally less influenced by changes in stock markets.

Metals and Commodities you can trade with Synergy FX:

TRADING METALS AND COMMODITIES WITH SYNERGY FX INCLUDES:

  • Compliment with all 40 + FX Currency Pairs and Global Indices
  • Trade around the clock with only short minute session closes
  • Low minimum trading volumes starting from 0.01 lots
  • Tight spreads and fast trade execution
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A Look Back at the History of Commodity Markets

Though commodities date back centuries ago when rice farmers traded in futures contracts to lock-in their profits, trading commodities is now as common and accessible as trading shares, contracts for difference (CFDs), FX/currencies and other financial instruments.

And why not? Commodities are all around us.

We use them in our every day living.

Think about these:

  • the ham or bacon and bread (wheat) you have for breakfast
  • the petrol that runs your car
  • the gold and silver components on your mobile phone
  • the orange juice you drink to quench your thirst.

All these are part and parcel of the world of commodities.

In this article we will look at the trading opportunities in the commodity markets and how you can evaluate commodities using fundamental analysis and technical analysis.

We will also consider the factors that affect commodity prices and how you can use risk management strategies when trading commodities.

But before we do that, you need to be familiar with the different commodity groups and other basic information that will help your trading in commodities.

Trade Commodities Using MT4

In this age of mobile trading and online trading platforms, you don’t have to be a rice farmer or agricultural producer to trade in commodities.

Today’s commodity traders also have one big advantage – an easy and accessible way to trade the commodities markets.

Using an online trading platform, like Synergy FX’s MT4 trading software, you can access and trade different commodities from oil, to gold and silver along with other instruments such as Index CFDs, major currency pairs, FX crosses and cryptocurrencies.

These online and mobile trading platforms also give you much more trading tools and resources like charting packages, FX market news, Expert Advisors (EAs) that you can use to manage your trades more efficiently.

Four Major Commodities Groups

There is a wide variety of items that comprise the global commodities markets. Here are the four major groups of commodities that you need to be familiar with:

  • Agricultural products (soft commodities) – this refers to food and food related products such as wheat, rice, soybeans, coffee, cotton and sugar.

  • Meat and Livestock – this is another food related group but mostly animal-based produce such as pork bellies, live cattle, lean hog and feeder cattle.

  • Energy – this group represents one of the most important commodities – oil – which is critical for business, production and manufacturing as well as in our daily lives. Items in this group include Brent crude oil and West Texas Intermediate or WTI Crude Oil, heating oil, natural gas and gasoline

  • Metals – this group includes Precious Metals as well as Base Metals e.g. gold, copper, silver, zinc, lead, aluminium

At Synergy FX, you can trade the following three commodity markets:

Open (GMT+3) Closed (GMT+3)
Gold (Spot) XAU Mon 01:00 to Fri 23:57 00:00 to 01:00
Silver (Spot) XAG Mon 01:00 to Fri 23:57 00:00 to 01:00
WTI Crude Oil Mon 01:00 to Fri 23:57 00:00 to 01:00

Why Trade Commodities?

There is no doubt that commodities are important part of our daily lives. And they also present a myriad of trading and investing opportunities that make them attractive to retail traders as well as institutional ones.

In this section we will look at the factors that make commodities trading an attractive proposition to all types of traders.

Whether you trade shares, CFDs, Indices or FX, trading commodities can be a logical addition to your trading strategy.

This is because aside from the inherent benefits of trading commodities on their own, you can also use them as a hedge to your other trading positions.

Here are some of the reasons behind the attraction of commodities trading

  • Liquidity – the global commodities markets is one of the most liquid and actively traded in the world due to the massive number of participants. From retail traders to agricultural producers, from oil companies to airlines and other oil users – trading commodities now form part of most people’s portfolio. This means you can easily get in and out of a trade when trading commodities.

  • Global demand – there is no doubt commodities are always in high demand. From your breakfast table to the weekly petrol you pump into your car, commodities feature in almost every area of our daily lives. This means this continuing demand for commodities around the world will have an impact on commodity prices.

  • Price movement – given the global demand discussed above, the constant price movement in commodities markets means there is a steady stream of trading opportunities. Whether you want to trade long (buy commodities) or trade short (sell commodities), chances are there will always be someone at the other end of the trade that can match your position.

  • Direct access to price movements – when you trade gold or oil, you are directly trading the price of the actual commodity. This lessens the level of risk in your trade compared to when you trade shares in a gold mining or an oil refining company. For active traders and those who want to have more control of their trading risk management strategy, trading commodities is a much better alternative to share trading in mining or resources stocks.

  • Hedging and risk management – while commodities can be traded as a directional trade (if you want to capture the rise in oil price) commodities trading can also be used as an effective hedging and risk management tools. For example, airlines and other transport companies may trade in oil futures contracts to lock in the price. This means they can manage their exposure and control their cost despite the price fluctuation in oil or gas prices. Many commodity traders also use it as a hedge to their forex positions. This is because commodities are commonly priced in US dollars, which means movements in the US dollar can impact the price of commodities.

  • Traded on margin – this is one of the biggest attractions of commodities trading – that it is traded on margins, which means you can have an exposure to a much bigger position using a relatively small trading capital. When trading commodities, you can take advantage of leverage though you have to be mindful it is a double-edged sword. You have to have your risk management strategy in place.

What Affects Commodity Prices?

Now you’re equipped with the basics of the commodities markets, it pays to know the different factors affecting the price movement in commodities.

As a commodity trader, it is in your best interest to keep an eye out for these factors that can have an immediate impact on commodity prices.

Here are the key factors to watch out for when trading commodities:

  • Supply and demand – the fact commodities involve food items, energy and other resources that are used on a daily basis, it means commodity prices can move depending on the supply and demand. If there are more buyers, chances are prices will tend to move higher and vice versa.

  • US dollar movement – most commodities are priced on US dollar. This means that any fluctuation on the greenback can have an effect on commodity prices as well.

  • Geopolitical factors – global conflicts and wars are the key geopolitical factors that affect commodities, particularly crude oil and oil-related products. Due to the limited number of countries producing oil, there are times they can impact the supply of oil and therefore push the price higher or lower.

  • Disasters and natural calamities – one of the most unpredictable factors to control, but still an important one to keep an eye on are hurricanes, cyclones and other natural catastrophes that can affect the production of commodities. For example, oil production can be impacted by cyclones and devastating weather patterns.

  • Seasonal factors – this refers to the seasonal demand for particular commodities. For example, the summer season in the Northern hemisphere is usually associated with an increase in oil price because that’s the time when people are driving long distances, going on holidays and consuming more petrol. Seasonal demand for specific food products – e.g. ham, bacon, milk, soybean and sugar – can also push prices higher.

How to Trade Commodities

Like other financial instruments in your trading portfolio, commodities can be evaluated using fundamental analysis and technical analysis.

  • Fundamental analysis and factors – using publicly available data on oil prices, production levels (supply) and demand (based on manufacturing and GDP growth levels), you can analyse potential trade opportunities in the commodities markets. You can also monitor whatever is happening in the commodities markets by using the market news and event/economic calendars on the Synergy FX website or within MT4. They will provide you with the dates and schedule of the release of important data that may impact commodity prices.

  • Technical analysis – using the charting capability on MT4 platform, you can track the price movements of the commodities you want to trade. Whether you want to trade oil, gold or silver, it is just a matter of opening up their respective charts and including them in your watchlist. This will give you a graphical view of the different time frames that can help you decide on whether to take a trade or not.

Major Commodity Exchanges

Globally, there are several commodities exchanges where big institutional commodity traders usually trade. Similar to the major stock exchanges around the world, these key commodities exchanges are where most of the commodity trading are transacted.

Chicago Mercantile Exchange (CME) – The CME is a financial and commodity derivatives exchange based in Chicago, USA. It is known to operate one of the largest options and futures line-up of any exchange in the world.

Chicago Board of Trade (CBOT) – The CBOT ranks as the oldest futures/options trading exchange in the world. It offers more than 50 different futures and option contracts for traders and investors.

New York Mercantile Exchange (NYMEX)NYMEX is the world’s largest physical commodity futures exchange that offers exposure to a wide variety of products. Its other division, the Commodity Exchange Inc. (COMEX) is best known for offering exposure to various metals contracts.

London Metal Exchange (LME) – Based in the UK, the LME is a major exchange that offers exposure to futures and options of a wide variety of base metals and other commodity products. Institutional traders keep an eye on the trading volume and activities at the LME particularly to keep track of movements in the resources and mining industry. Some of the metals traded include aluminum, copper, tin, nickel, zinc, and lead.

Intercontinental Exchange Inc (ICE) – This is a US-based exchange that operates futures and over-the-counter contracts via internet marketplaces. The company was originally focused on energy contracts but has widened its scope by offering exposure to a number of commodities including cocoa, cotton, sugar, iron ore, natural gas and crude products. ICE is the latest exchange to announce that it will be offering cryptocurrencies in late 2018.

Commodity Trading on your MT4 Platform

If you have been trading the markets for any length of time, you know very well that commodity trading for retail and individual traders is now as easy as trading shares, FX, CFDs or Indices. You don’t have to open an account with any of the major commodity exchanges like the LME, CME or CBOT to open a commodity trading account.

At Synergy FX, we give you the ability to trade commodities including gold, silver and oil along with your FX or Index trades.

Using the MT4 trading platform, access to the global commodity markets is now at your fingertips. And with so many trading tools, market research and news, charting packages, EAs and other resources available on the platform, commodity trading has never been easier.

Ready to Trade Commodities on MT4?

As you can see, there are numerous trading opportunities in commodity trading. If you’re ready to trade commodities, you can get started if you have access to an MT4 trading platform.

All you have to do is open a live trading account which will give you access to all the major commodities you want to trade. You can do the same with a demo trading account.

Using the Synergy FX trading platform, you can get started trading commodities by clicking here or on the links below.

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