A commodity is a physical good that can be bought or sold on commodity markets. Commodities can be categorised into either hard or soft varieties. Hard commodities are natural resources like oil, gold and rubber, and are often mined or extracted. Soft commodities are agricultural products such as coffee, wheat or corn.
The commodity markets are traded on in a similar way to other types of financial instruments, but there are some things to be aware of in order to avoid any shocks or surprises when dipping your toe into commodities trading. Learn how to trade commodities.
One of the features of spread betting and CFD trading on commodities is that you only need to deposit a percentage of the full value of your position – the initial margin requirement – to open a trade, known as trading on leverage. Trading on leverage amplifies your profits and losses equally, so it's important to manage your risk.
Spread betting or trading CFDs on commodities offers the opportunity to speculate on the underlying price movement of popular metals like gold and silver, energies like Brent and West Texas crude oil, and natural gas, plus soft commodities such as wheat.
There are no commission fees to pay, although other charges may apply, including the instrument's spread, plus overnight holding costs if you're holding the trade open for longer than one day. View our trading costs for more details.
Commodities are generally sorted into categories, including precious metals (gold, silver), agricultural (wheat, coffee), and energy (crude oil, natural gas). Learn how to trade on commodities.
Rather than buying commodities at the spot price, a commodity forward allows a buyer and seller to agree on a transaction with a future date and price in mind, usually with the buyer’s intention of selling it later for a higher amount.
In order to become a commodity trader with us, you’ll need to decide whether you want to spread bet or trade CFDs, and then open an account. Once your account is open, you’ll be able to trade on our broad range of commodity derivatives, including Gold, Brent and West Texas crude oil, Natural Gas, Sugar, Live Cattle, Heating Oil and many more. We also offer our exclusive commodity indices, which allow you to take a view across the whole precious metals, energy, and agriculture sectors. With all our commodity instruments, you can take a position on either side of the market, depending on whether you think the price will rise or fall in value.
Our margin rates for commodities start at 5% for Gold and 10% for other commodities. This means that if you invested £5,000 into trading on Gold, you would control a full trade value of £100,000, and £50,000 for all other commodities. However, please note that your profits and losses are magnified, as they are relative to the full trade value. See our guide to leverage in trading for more information.
The commodity sector can be a good introduction to the financial markets for beginner traders, although it’s important to remember that all markets have their own set of risks. Energy-focused commodities for example can be particularly volatile.