If you want to trade energy, gold, precious metals, grains, oil, or soft commodities markets, commodity CFDs are a simple way to trade them. Just how many of these markets are available depends on the individual CFD provider. Commodity CFDs are a relatively easy approach to commodity trading compared to Futures exchanges.
It is important to understand both of the main ways of measuring commodity price changes. For instance, gold prices can be reported as a futures price or a cash transaction price (also known as the spot market). A price quoted for transferring possession of the gold the same day is the spot price, while a price for taking possession on a certain future date is the futures price. It is common to see either price reported, but it is the futures price that is shown on a regulated exchange. Accordingly, the futures prices fall under the reporting process required by the exchange.
It is the futures of the underlying assets that determine the values of commodity CFDs, so their core features are virtually the same as the futures, down to the tick values and trading hours.
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Although there is usually no difference between the quotes and the dealing spread of the futures market, it is not certain to be a match as providers seeking profits might look to widen the spreads.
Someone looking to follow the price action of gold could prefer a CFD to a future for some illustrative reasons. Essentially, a CFD for a gold commodity not only provides every benefit of dealing with futures contracts, but also adds bonuses like the ability, during a limit session, to use guaranteed stop losses. Moreover, the efficiency of managing the whole of your money in a single place, as opposed to splitting between futures and CFD accounts, provides a decided advantage.
The drawbacks of commodity CFDs include the fact that brokers could quote you a wider spread than that of the price of the future, which can cut into your bottom line to an extent. Another point is that futures markets offer a vast range of commodities, including corn, cattle, and the weather. On the other hand, commodity CFDs might make many of these available, but exactly which ones will depend on the specific provider. That is why a provider should first be checked if there is a particular field of commodities you are most comfortable with.
Other related articles on CFDs include CFDs and Dividends and CFDs vs. Spread Betting.
