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A commodity is a basic physical asset that is typically used as raw material in the manufacturing process that can be traded in the financial markets. There is little difference between a commodity coming from one producer or another, and all commodities of the same type can be traded as the same asset on exchanges.
Commodities are generally split into two main types. These are hard commodities, which are materials that need to be mined or extracted from natural resources, and soft commodities, which are products that need to be grown, farmed, or raised.
Some commodity categories include:
Energy: These are resources that produce energy. They include crude oil, heating oil, natural gas, gasoline, and more. As a result of having a limited global supply, energy prices often rise with demand. Generally, energy commodities are considered volatile.
Metals: Metals include both industrial and precious metals. Industrial metals are those used in manufacturing processes and are usually used in large quantities, and they include tin, copper, aluminium, and more. Precious metals are normally used in the production of jewellery, and they include gold, silver, and platinum.
Agriculture: This category includes crops, with the most popular being soybean, wheat, sugar, coffee, and corn. The supply of these commodities tends to be affected by the climate, such as the occurrences of droughts, flooding, and other natural disasters, and diseases, which can have an impact on their trading price.
Livestock: This category includes animals and animal products, such as live cattle, pork, and milk. The supply of these commodities tends to be affected by the climate as well, or by manufacturer and producer availability, which can have an impact on their trading price.
Trading commodities is usually done through futures contracts on exchanges, or through forward contracts over-the-counter. Prices are agreed upon in advance, as well as the quantity and type of commodity.
In a physical commodities market, the actual physical goods will be exchanged. Most commodity traders, however, do not physically own the goods. Rather, they speculate on price changes in the market and aim to profit from price movements without taking delivery of the actual commodity.
ADSS offers a range of global markets for traders, with CFD opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.
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8th floor, CI Tower
Corniche Road
PO Box 93894
Abu Dhabi
United Arab Emirates
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Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.
ADS Securities LLC – S.P.C (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates under First Category: Dealing in Securities and Fifth category: Arrangement and advice (Introduction). ADSS is a Limited Liability Company – Sole Proprietorship Company incorporated under United Arab Emirates law. The company is registered with the Department of Economic Development of Abu Dhabi (No. 1190047) and has its principal place of business at 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.
The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.
ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.
