Trading Commodities
Lotus FX offers contracts for difference (CFDs) on commodities. This page explains how commodity CFDs work and the risks to understand before you trade them.
What is a commodity CFD?
A commodity CFD is an agreement to exchange the difference in the price of a commodity between the time a position is opened and the time it is closed. You do not buy, own or take delivery of the physical commodity. Instead, your profit or loss depends on how far the price moves and in which direction.
Commodities are commonly grouped into metals, energy products and agricultural products.
- No ownership or physical delivery of the underlying commodity.
- Positions can be opened to buy (go long) or to sell (go short).
- Trading is on margin, so leverage applies.
- Costs can include spreads, commissions and overnight financing.
What moves commodity prices?
Commodity prices can change quickly and are influenced by many factors, some of which are difficult to predict.
Supply and demand
Production levels, stockpiles and consumer or industrial demand all affect the price of a commodity.
Events and weather
Political events, conflicts, trade policy and weather can disrupt production or transport.
Currency moves
Many commodities are priced in US dollars, so changes in the value of the dollar can affect their prices.
Economic data
Growth figures, interest rate decisions and inventory reports can shift market expectations.
Going long or short
If you buy (go long), you gain if the price rises and lose if it falls. If you sell (go short), you gain if the price falls and lose if it rises. Either way, the market can move against you.
Leverage and margin
Leverage lets you open a position that is larger than the margin you deposit. It magnifies both gains and losses, and a small price move can lead to a large loss. If your margin falls too low, positions may be closed automatically.
Trading costs
Costs can include the spread (the difference between the buy and sell price), any commission, and overnight financing (swap) for positions held past the daily cut-off. Check the costs for each instrument before you trade.
Leverage, margin requirements and costs can differ between instruments. Read more about leverage and margin.
Risk warning: An investment in derivatives may mean investors may lose an amount even greater than their original investment. Anyone wishing to invest in any of the products mentioned in lotusfx.co should seek their own financial or professional advice. Trading of securities, forex, stock market, commodities, options and futures may not be suitable for everyone and involves the risk of losing part or all of your money. Trading in the financial markets has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. Don't invest and trade with money which you can't afford to lose. Forex Trading are not allowed in some countries, before investing your money, make sure whether your country is allowing this or not.