Commodities - How It Works

When trading commodities with Finotec, you do not actually purchase or own the traded good. (Imagine if you were to buy and store gold or oil!) Thanks to financial instruments and derivatives such as futures contracts or ETFs, you speculate on the price of a given commodity.

This means that you can buy or sell the commodity and take advantage of its price variation (upward and downward) without having to actually own the goods. Finotec offers several commodities to trade via futures contracts, as well as spot silver and spot gold to trade on the spot market (under the symbols XAU and XAG). The main difference between trading the spot market and trading futures market is the timeframe of the transaction. Trading commodities futures may be used either for speculation or hedging purposes. When you are speculating via commodities futures, you are predicting the future direction of a given commodity, hoping to benefit from your prediction. You open a long position (in other words, you buy) if you believe the price of the commodity will go up, and you open a short position (or sell) if you believe it will go down.

By choosing correctly – and at Finotec, we provide you with all of the resources you need to do so – you can make money regardless of the market direction. Short selling is one of the major advantages of commodity futures trading. So, whether a region’s economy is thriving or declining, commodities trading always offers a potential for profit

One of the major appeals of commodities trading with Finotec is the Leverage options that we offer. Leverage is indeed what makes commodity trading so potentially profitable in a relatively short time-frame and limited initial capital. At Finotec, when you trade commodities via futures, you get up to 20:1 leverage. This means that to open a long position on a 500-unit crude oil futures contract with a trading rate of $92, you will only have to deposit 1/20th of the full value of the contract: 92x500/20 = $2,300.

Nowadays, all sorts of raw and primary products are traded on commodity markets including agricultural products such as corn, coffee, rice and wheat, metals such as gold, silver, and iron, fuels such as crude oil and diesel, to name just a few.