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Everything You Need to Know About Commodity CFDs

CFDs are a type of contract for difference as a standard financial instrument. The idea behind these products is relatively simple: traders buy a CFD, and if the price rises, they profit. If not, then they incur a loss. So far, so good—but what exactly are commodity CFDs? What kinds of commodities can Australians trade? And how can they track their open positions? This article explains all of these so traders dealing with CFDs can get started trading confidently!

What Are They?

These CFDs are derivatives, which are contracts for difference. They allow Australians to trade the value of an asset without actually owning it.

A derivative is a financial contract that derives its value from one or more underlying assets (e.g., stocks, bonds, currencies and commodities). In the case of CFDs based on commodities, these underlying assets include 

  • Oil
  • Gold  
  • Agricultural products have a steady flow of demand and supply.
  • Other raw materials used in industry and manufacturing processes.

Can Australians Trade Commodities on the Weekend?

Commodities are traded around the clock, so traders can trade them at any time of the day or night. However, in some countries, trading hours are usually from 8:00 a.m. to 5:00 p.m., Monday through Friday (or 7:00 a.m. to 4:00 p.m.) and 0:00 a.m until 11:59 p on Saturdays, Sundays and holidays.

What Is the Difference Between a Spot and a Future Commodity Trade?

A spot commodity trade is a trade that is settled at the end of the day. With this type of trade, Australians agree to buy or sell a specific quantity of a physical commodity for a specified price on an agreed-upon future date.

In contrast, a future commodity trade involves agreeing with another trader to buy or sell physical commodities at some point in the future. Futures trading allows traders to speculate on price movements without owning any actual goods until their contract expires (or, if they choose, exercising it).

The primary difference between spot and future trades is that while both options involve prices quoted as dollar values per unit weight/volume/etc., with futures contracts, there are no quantities specified or delivery dates agreed upon; instead, these details are worked out after trading begins based on factors such as supply and demand and market conditions at that time.

How to Track Open Commodity Positions?

For active traders in Australia, it pays to keep track of all the open positions. If traders have multiple trades open at once, it can be hard to remember where the money is invested or how much profit or loss they have made on each trade.

When trading these CFDs, there are several ways for people to keep track of the open positions:

  • In the trading platform.
  • On the website of the Australian Commodity Exchange
  • On a third-party website.
  • With the help of an app.

Commodity CFDs are a great way to trade and can be profitable if the market goes the right way and the risks are managed effectively. The biggest thing to remember when trading CFDs based on commodities is that it is not just about buying a contract – it’s about understanding the risks and fees involved in trading them. 

Traders must also make sure that their broker offers a good trading platform with all of the features needed for futures and options trading before opening an account with them. 

CFDs are a great option for those who want to start trading commodities but don’t know where to start. They allow traders to invest in many different types of products without having any of them physically in their possession. By understanding how these trades work and what sort of risks they involve, Australians can make better decisions about how much money (and time) is right for their investment goals.

Rachel Miller
I am Rachel , a full time content writer at thewebend.com.
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