CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Commodities and futures trading opens a world beyond stocks and forex—raw materials like oil, gold, or wheat, traded through contracts that lock in future prices. For intermediate traders, this market blends real-world supply-and-demand dynamics with financial strategy, offering unique opportunities to profit or hedge. It’s not beginner territory—leverage is high, and volatility can sting—but with the right know-how, you can tap into its potential. Here’s how to trade commodities and futures like a pro.
Commodities are physical goods—think crude oil, corn, natural gas, or silver. Futures are contracts to buy or sell these goods at a set price on a future date. Say oil’s at $70 a barrel today; a futures contract might lock in $72 for delivery in three months.
You’re not hauling barrels home—most traders settle in cash, speculating on price moves. Futures standardize quantity (e.g., 1,000 barrels per oil contract) and expiration (monthly or quarterly), traded on exchanges like the CME or NYMEX.
Why trade them? Commodities react to global events—droughts, wars, OPEC decisions—offering diversification from stocks. Futures amplify this with leverage—a $5,000 margin might control $50,000 in oil. That’s power, but it cuts both ways.
Each moves differently. Gold might climb during uncertainty; oil spikes on supply cuts. Pick one or two to master—spreading thin dilutes focus.
Futures contracts have a ticker (e.g., CL for crude oil), size, and expiry (CLZ24 for December 2024). You deposit a margin—say, 10% of the contract value—to trade. If gold’s $2,000/oz and one contract is 100 oz ($200,000), a $20,000 margin controls it. A $50/oz move nets $5,000—25% on your margin—but a drop wipes you out fast. Contracts expire; roll over to the next month or close out to avoid delivery.
Trend Following
Commodities trend hard—oil might rally for months on OPEC news. Use a 50-day EMA crossover: buy when the 20-day EMA crosses above, sell when it dips below. Gold’s at $2,050, breaks resistance at $2,070 with volume? Go long, stop at $2,040, target $2,100. Check COT (Commitment of Traders) reports—big funds piling in signal strength.
Seasonal Plays
Agriculturals love patterns—corn peaks in summer, drops post-harvest. Historical charts show July soybeans often climb. Buy May futures at $12/bushel if RSI confirms momentum, sell at $13 in June. Weather glitches (droughts) can spike this—watch forecasts.
Spread Trading
Trade the gap between contracts. If July oil’s $75 and September’s $76, short July, long September, betting the spread narrows. Risk’s lower—price direction matters less—but monitor roll costs. Use tight stops (1% of margin).
Breakout on News
OPEC cuts production? Oil jumps. Pre-event, set buy-stops above resistance (e.g., $72 on CL) and sell-stops below support ($70). Post-news volatility triggers one; trail with ATR (2x ATR locks profits). Practice on micros—smaller contracts like MCL (500 barrels vs. 1,000).
Futures are leveraged beasts—control risk or bust. Risk 1% of your account per trade—$100 on a $10,000 balance. A 50-cent move in gold ($50/contract) fits that with a 0.2-contract position. Stops are non-negotiable—place them outside normal wiggles (1.5x ATR). Cap daily losses at 3%; hit it, quit. Avoid overexposure—two contracts max, even on a hot streak.
Use CME data for contract specs—tick size, margin rates. Platforms like NinjaTrader or Interactive Brokers offer charts and order flow. Watch volume—low volume breakouts fizzle. Add MACD for momentum, Bollinger Bands for volatility squeezes. Economic calendars flag USDA reports or EIA oil inventories—key drivers.
Crude oil’s at $71, EIA predicts a supply drop. The 4-hour chart shows a breakout above $72, MACD turning bullish. Buy one micro contract (MCL) at $72.50, stop at $71.50 (100 ticks, $100 risk), target $74.50 (200 ticks, $200 gain). It hits $74, you bank $150—50% on margin. News plus technicals aligned; that’s the edge.
Commodities and futures offer uncorrelated returns—stocks tank, gold might soar. Leverage turns small moves into big wins, and real-world drivers (weather, policy) add predictability. It’s intermediate turf—volatility demands respect, but rewards skill.
Ready to trade commodities and futures with confidence? Start learning today with Pipup Academy’s expert-led courses—they’ll guide you through every contract and strategy!
