Commodity trading may not be as widespread as equity, index, or Forex trading, but it continues to gain traction.
It serves as an excellent portfolio diversification tool, providing hedging opportunities, and remains a favorite alternative to currency trading. Want to start trading commodities? See our top-rated brokers.
Top Futures Brokers for Commodity Trading
- Plus500, The best pricing environment for futures traders in the USA.
- FXTM, Best all-around broker with high floating leverage and fast execution.
- FP Markets, ECN trading with leverage up to 1:500.
- AvaTrade, Highly regulated, choice of fixed or floating spreads.
- Pepperstone, Great ECN execution on MT4/5, cTader, TradingView and Pepperstone proprietary platform.
Best Commodities Trading Platforms Comparison
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Regulators | ASIC, CySEC, EFSA, FCA, FMA, FSCA, MAS, SCA | CMA, FCA, FSC Mauritius, FSCA | ASIC, CMA, CySEC, FSCA | ASIC, BVI, Central Bank of Ireland, FFAJ, FSCA, KNF, MiFID | ASIC, BaFin, CMA, CySEC, DFSA, FCA, SCB |
Year Established | 2008 | 2011 | 2005 | 2006 | 2010 |
Execution Type(s) | Market Maker | ECN/STP, Market Maker | ECN/STP | Market Maker | No Dealing Desk, NDD |
Minimum Deposit | |||||
Average Trading Cost EUR/USD | 1.3 pips | 0.1 pips | 1.2 pips | 0.9 pips | 1.1 pips |
Average Trading Cost GBP/USD | 1.7 pips | 0.2 pips | 1.4 pips | 1.5 pips | 1.4 pips |
Average Trading Cost Gold | - | $0.18 | $0.16 | $0.29 | $0.15 |
Trading Platform(s) | Proprietary platform, Web-based | MetaTrader 4, MetaTrader 5, Proprietary platform | MetaTrader 4, MetaTrader 5, cTrader, Proprietary platform, Web-based | Other, MetaTrader 4, MetaTrader 5, Proprietary platform, Web-based+ | Other, MetaTrader 4, MetaTrader 5, cTrader, Proprietary platform, Trading View+ |
Islamic Account | |||||
Negative Balance Protection | N/A | N/A | |||
Get Started Visit Website82% of retail CFD accounts lose money | Visit Website | Visit Website | Visit Website | Get Started Visit Website75-95% of traders on margin lose |
Plus500
In Summary The best pricing environment for futures traders in the USAPlus500 is a global CFD broker founded in 2008. It maintains an excellent regulatory environment provided by the FCA in the UK, the CySEC in Cyprus, the ASIC in Australia, the FMA in New Zealand, the FSCA in South Africa, the FSA in Seychelles, and the MAS in Singapore. Plus500 offers traders a choice of more than 2,800 assets to trade, including nearly 900 options contracts, in a commission-free trading environment. This extremely wide range of choice can make Plus500 an appropriate choice for traders looking to pursue wide diversification of assets. Plus500 is licensed to offer CFDs through ASIC (AFSL #417727), and through the FMA (FSP #486026), for licensed CFDs in New Zealand. Plus500 trading services are also available in South Africa (Authorised Financial Services Provider #47546). In addition, Plus500CY Ltd is authorized & regulated by CySEC (#250/14), while Plus500EE AS is authorised and regulated by the Estonian Financial Supervision and Resolution Authority (Licence No. 4.1-1/18).
Pros & Cons
- Broad asset selection in equities and options
- Free and unlimited demo account
- Advanced free-of-charge analytical trading tools
- Global and regulated fintech platform
- Sub-standard trading platform without support for automated or social trading
FXTM
In Summary Best all-around broker with high floating leverage and fast executionFXTM remains one of the best CFD commodity brokers due to excellent execution statistics, confirmed by Big Four accountancy PricewaterhouseCoopers Limited (PwC). In less than ten years, more than 2,000,000 traders opened accounts at FXTM, which is one of the most experienced brokers for emerging and frontier markets. The superior technology powering the core trading environment at FXTM improves the trading profitability of the eight available commodities and all other assets. The 30% deposit bonus up to $250 provides all clients with an excellent boost, and clients have access to maximum leverage of 1:2000.
Pros & Cons
- Excellent commission-based Forex pricing environment and transparency
- Upgraded MT4/MT5 trading platforms plus proprietary mobile trading app
- Quality market research and educational content for beginner traders
- A highly regulated broker with a tier-1 license
- Limited choice of commodities
FP Markets
In Summary ECN trading with leverage up to 1:500FP Markets embarked on a vision to create market-leading Forex trading conditions in 2005 and grew into a dominant Australian-based multi-asset broker. It provides commodity traders with just seven assets but maximum leverage of 1:500. Adding to its appeal is the no dealing desk (NDD) execution model and an execution speed below 40 milliseconds. FP Markets has no restrictions on trading strategies. The minimum spread of 0.0 pips combines with a competitive commission structure of just $6.00 per round lot add to its excellent trading environment. Full support for automated trading via the MT4 and MT5 trading platforms plus VPS hosting allows FP Markets to top our commodity brokers list.
Pros & Cons
- Choice of trading platforms and auxiliary trading tools
- Very competitive cost structure and excellent asset selection
- Low minimum deposit requirement and leverage of up to 1:500
- Well-regulated and trustworthy
- Availability of Iress geographically restricted
AvaTrade
In Summary Highly regulated, choice of fixed or floating spreadsAvaTrade, trusted by more than 300,000 traders since 2006, provides clients with 24 commodities, making it one of the leading commodity trading brokers via CFDs. The commission-free trading environment meets slightly above average but acceptable spreads. The 24/7 customer support in 14 languages makes this multi-asset broker an excellent choice for new traders. The spun-out SharpTrader trading academy remains one of the best educational tools on the market. It adds tremendous value to the core trading environment with more than 40 lessons and over 200 videos. AvaTrade has regulatory oversight in seven jurisdictions and established a reputation for trust and transparency.
Pros & Cons
- High quality educational offering via AvaAcademy
- Excellent choice of trading platforms catering to various trading needs
- Broad asset selection and cross-asset diversification opportunities
- Well-regulated and trusted broker with oversight from a central bank
- Trading costs competitive but nothing special
Pepperstone
In Summary Great ECN execution on MT4/5, cTader, TradingView and Pepperstone proprietary platformPepperstone, founded in 2010 and headquartered and regulated in Australia, the U.K., and Dubai, is probably the most well-known ECN Forex broker in the world. As an ECN broker, Pepperstone offers raw spreads and low commissions. Taken together, Pepperstone’s “Razor” account offers one of the most competitive costs of trading in Forex that you will find anywhere. In addition to their global headquarters in Australia, Pepperstone also have presences in London, England, where they enjoy full regulation by the Financial Conduct Authority (FCA), and in Dubai, where they are regulated by the Dubai Financial Services Authority (DFSA). Pepperstone is also regulated by the Cyprus Securities And Exchange Commission (CySEC) in Cyprus, the Capital Markets Authority of Kenya (CMA) in Kenya, the Securities Commission of The Bahamas (SCB) in The Bahamas and the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in Germany.
Pros & Cons
- Excellent choice of trading platforms consisting of MT4/MT5, cTrader, TreadingView and Pepperstone Platform
- Market-leading MT4/MT5 upgrade package, Autochartist, and API trading
- Social trading support via Signal Start, MetaTrader Signals, Copy Trading by Pepperstone, DupliTrade
- Leverage of up to 1:400 depends on jurisdiction and superb trade execution
- Demo accounts have 60-day time limits
Commodity Trading
Commodities fall into two distinct sub-categories: hard and soft commodities. The former includes everything that is mined or extracted, for example, oil and gold. Several sub-categories exist and structure the sector. Some of the most traded ones include industrial metals, precious metals, and energy. The latter consists of items that are grown or harvested and generally used for personal consumption. Wheat, corn, soy, sugar, cattle, and orange juice remain heavily traded across global exchanges.
A commodity broker is an individual or company that places trades on exchanges on behalf of clients.
Depending on the investment or trading strategy, the needs of clients and required services will differ.
Types of Online Commodity Brokers:
Floor Broker (FB) - A floor broker is an independent member of an exchange and can act as a broker for other members if they need assistance in processing their order flow.
Futures Commission Merchant (FCM) - An FCM solicits orders for clients and receives a commission for services rendered.
Introducing Broker (IB) - An IB has a direct relationship with the client and can offer trading advice.
Commodity Trading Advisor (CTA) - The three types of CTAs consist of technical, fundamental, and quantitative. They can act as an asset manager within the firm and trade portfolios based on their expertise.
Commodity Pool Operator (CPO) - A CPO solicits investments from companies and accredited investors for trading on exchanges using various strategies, products, and leverage.
Associated Person (AP) - An AP is an employee of a broker, floor broker, FCM, CTA, or CPO.
Futures Trading
A futures contract is a legally binding agreement to buy or sell the specified volume of the underlying asset by the delivery date. Commodity futures rank among the most actively traded futures contracts, followed by currencies. Commodity producers and consumers can benefit from futures trading. Commodity producers can lock in prices if they believe the asset will deteriorate in value and guarantee a sale while receiving necessary profits before delivery to ensure ongoing operations. This is vital in the commodity sector, notably soft commodities. Commodity consumers can hedge exposure to price action while ensuring they have the necessary raw materials without worrying about sourcing them elsewhere. Traders can use futures contracts to speculate on price action of commodities.
How to Start Commodity Trading
Before traders decide to start commodity trading, they should invest in their education. While understanding the forces of supply and demand, the primary driver for price action in commodity trading, traders must consider factors out of their control. They include the weather and geopolitical events, which may significantly impact existing trends and provide a catalyst for price action.
Commodity trading has two sub-categories, soft and hard commodities. The former refers to anything grown and raised, while the latter to anything extracted or mined. Traders must decide what to trade, as each commodity has unique characteristics. Global population growth ensures rising demand for commodities and commodity trading, which dates to 4,500 BC in Sumer (now modern-day Iraq).
Since the US Dollar is the quote currency for all commodities, traders should factor in a consideration of US monetary policy, which usually has an inverse relationship to commodities. Finally, opening and funding a trading account is a necessary final step before starting commodity trading.
Pros and Cons of Commodity Trading
Traders should understand the pros and cons of commodity trading before opening an account and starting to trade commodities.
The pros of commodity trading are:
- High liquidity, making it ideal for demanding short-term strategies
- Diversification opportunities in an asset class guaranteed to expand
- Portfolio hedging opportunities, including against economic and geopolitical risks
- Inflation hedging opportunities, notably gold and silver
- Transparent markets with high regulation
The cons of commodity trading are:
- High volatility, which makes commodity trading challenging for beginners
- No passive income opportunities, as commodities do not pay dividends or interest
- Exposure to geopolitical tension requires in-depth knowledge of non-financial topics
- Commodity trading reacts to unpredictable weather patterns
- Lower average returns versus higher average volatility
- Asset concentration in ETFs
Commodities Available for Trading
The two main classifications are hard commodities and soft commodities, but each consists of sub-categories. The most traded ones are precious metals and energies, which are offered by all top commodity brokers. There are 57 core futures contracts traded globally, with multiple options contracts on each.
Factors to Consider When Choosing Brokers for Trading Commodities
- Established & Reliable Brokers
- World-Leading Brokers - Taking it one step further are world-leading brokers with established operating subsidiaries in primary markets.
- Forex commissions & Fees - I recommend raw spreads with a competitive commission of no more than $7 per lot plus a volume-based rebate program.
- Funding & Withdrawal Methods - The best commodity brokers will provide multiple funding and withdrawal methods.
- Responsive Customer Support
- Broad Trader Resources Offering - This separates the best brokers from the merely good ones. For example, automated trading solutions, including VPS hosting.
- Regulation - Traders should avoid unregulated brokers.
- Account Types
- Instruments & Products - Traders should assess the product portfolio to determine if it suits their trading requirements.
- Adequate Leverage & Margin
