If you want to trade in commodities like oils, metals, grains and some agricultural or ‘soft’ commodities, a simpler way to trade them is through commodity CFDs. Access to commodity CFDs is much easier and more convenient than futures exchanges. However, just how many of these commodities are available to you depends largely on the CFD provider you choose.
It is crucial that you understand the way commodity prices are shown because it may lead to a bit of confusion at times. Commodity prices are reported as spot price (the current market price at which a commodity can be bought) as well as futures price, the price at which it will be available in future and reflects market sentiment. A regulated exchange shows the price of futures contracts and this is the underlying reference instrument of commodity CFDs.
The price of commodity CFDs depends upon the futures of the underlying commodity. A CFD provider endeavours to match the bid and offer prices of commodity CFDs with prices in futures exchange but there is no guarantee.
Commodity CFDs enjoy a distinct advantage in that they provide easy access to commodity futures and lend well to trading flexibility due to smaller manageable lot sizes. However, all good things have a flip side. You may have to manage between futures and CFDs because the provider that you choose may not allow trading in all commodities that you want to. Moreover, it is not uncommon to see providers to increase their spreads to increase profits or manage their risks in volatile market conditions.
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