You can trade CFDs using commodities as their underlying assets. This means that you have the exciting opportunity to speculate on assets such as oil, gold, silver and copper, etc. When you trade commodities directly, you have quite a daunting task in that you have to evaluate and gain a feel for the magnitude or size of their price movements. In contrast, you will discover that trading commodities using CFDs is a simple task because you can focus on selecting just their future price direction without concerning yourself about their size. Imagine when trading commodities on the options or futures markets, you have to deal with contract periods and expiry dates as well as contract sizes. A crude oil contract consists of 1000 gallons of crude oil or a contract of orange juice is 42,000 gallons of juice. This becomes complicated and confusing whereas when trading CFDs for these commodities, you are only concerned with the price difference between the beginning of the trade and when you close the trade.
However, even despite this significant simplification, you must still adopt caution because commodity trading usually involves much higher levels of volatility than other forms of investment speculation, such as forex and shares. For example, the fluctuations of gold prices can be as much as twenty times larger than the equivalent ones of the EURUSD currency pair within the same time period. This feature presents you with a great potential for large profits if you know what you are doing when trading commodities. However, there is also a serious downside because your risk exposures will also be much higher when trading gold.
Consequently, the key to success when trading commodities using contracts for difference still depends on careful analysis and research. For instance, if you could gain assurance that the price of gold will rise constantly over the next few months, you could then action a ‘Buy’ with confidence using gold as the underlying asset. To see all the commodities you can trade with NSXCOIN, visit our Asset Index.
Similarly, you may decide that a new surge in the global production of industrial and electrical products was imminent and that it would involve a large increase in the usage of electrical copper wiring. Under such conditions, you should consider investing in copper by activating a ‘Buy’ CFD with this metal as the underlying asset.
You should now be able to see the importance of keeping yourself up-to-date with all the current trading trends of commodities if you want to be successful at trading CFDs using them as underlying assets. Basically, you must develop an appreciation about when to expect the prices of commodities to shift, either downwards or upwards.
As such, you need more than just gut feelings and hunches to succeed at trading commodities using CFDs. You will have to undertake extensive research in the global demands and trends of all commodities that interest you, especially if they are precious metals, petrol or natural gas, etc. If this is your intended objective, then you can obtain quality information about all commodities by visiting appropriate news agencies specializing in this subject, which you can locate on the Internet.
Fundamentally, the actions required to trade CFDs based on commodities are exactly the same as all other asset types. The only major difference is that you will need to undertake more extensive research so that you can take advantage of and defend yourself against the higher levels of volatility produced by this type of asset class.
Although you must always respect the increased risks involved, you must acknowledge the significant opportunities you can gain to open worthwhile and consistent trades by using contracts for difference to trade commodities. This is because you just need to predict the direction that the price of the asset will move and not its size or magnitude.
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