Commodity CFD FAQs
With so many commodity providers out there it can be hard to find the right one that suits your trading requirements. Are you currently with a provider that can tick all these boxes?
1. Are your commodity providers headline spreads tight and transparent?
While minimum spreads can grab the headlines, they don't tell the whole story. Markets can be volatile and the underlying market spreads can fluctuate and widen throughout the day. At CMC Markets we believe it is important that commodity CFD providers should be more transparent and that they should highlight the available spreads more clearly. Consistently tight spreads are a reflection of our pricing consistency throughout the day. All of our quote panels via our CMC Tracker web platform have the current spread clearly visible allowing you to see what the dealing costs are, even in volatile markets.
2. Who executes your trades?
With CMC Markets, all trades are 100% automated on the CMC Tracker platform, which means no dealer intervention and fast processing. With multiple price streams from multiple commodity exchanges, we offer highly competitive prices, and with our 100% automated execution, you have none of the hassles or restrictions that come when trying to trade quickly on news events or economic announcements.
3. Can you customise margins with your CFD provider and trade commodity CFDs long term, cost effectively?
Many commodity CFD traders are forced to use fixed margin (leverage) often with expensive financing rates built in to the price. With CMC Markets you have the flexibility to be able to choose your margin requirements and only pay financing on what you ‘borrow’ rather than on the entirety of the position as with some other traditional CFD providers. You can even choose to put forward the full value of the position yourself and gain exposure to commodity CFDs with minimal cost even for long-term investment.
4. Are you receiving fractional pip pricing?
Commodity CFD providers often quote to just one decimal place (two decimals when trading crude oil). The underlying market, however, offers additional precision within price quotes, meaning many providers round these to the nearest decimal (pip), widening the spread in the process. CMC Markets offers precision pricing and quotes an additional decimal place on all our commodity CFDs enabling us to offer tighter spreads.
Precision pricing can increase your trading opportunities, prevent unnecessary stop loss execution, and help you save money.
5. Have you got access to fractional trading?
Traditionally, the minimum trade size for any commodity CFD trade is one CFD contract. With a CFD account on our CMC Tracker platform you can now trade from as little as a 1,000th of a CFD with our fractional trading feature. For new traders this gives you the ability to trade commodity CFDs with smaller trade sizes so you can get used to this exciting market before placing larger trades.
6. Does your commodity CFD provider offer carry trades?
With our cash prices on commodity CFDs, unlike futures, you can take advantage of what is known as a ‘carry trade’. This is a strategy in which a trader sells (or buys when the cash price is above the futures price) a certain commodity with a relatively high carrying cost in an attempt to profit from receiving this payment.
The trader would believe that the carrying cost is going to be greater than any price appreciation and interest expense (if any) in taking out the position. These carrying costs can often be substantial, depending on the instrument you are trading – energy commodities in particular, natural gas and heating oil, are known for having highly volatile carrying costs due to storage constraints, seasonality factors, weather and politics.
7. Are you able to access support 24 hours a day?
We are available 24 hours a day from Sunday 9pm through to Friday 10pm, and Saturday 9am to 5pm GMT/BST. We take great pride in our standards of service, yet we are constantly working to improve them to make sure they match your expectations and reflect a world-class offering.
8. Does your provider offer up to 20 years of price history on commodity charts?
Many commodity CFD traders use technical analysis to help them make trading decisions, and with up to 20 years of price history available on our commodity CFDs it’s never been easier to spot significant support and resistance levels. Combine this with our technical pattern recognition technology, and you will have a significant advantage over the three months’ worth of price history offered by many other traditional futures providers.
9. What risk management tools does your spread bet or CFD provider offer?
Trading commodity CFDs on low margins can be risky in volatile markets, and you could lose more than your initial deposit more rapidly. To help you manage some of these risks CMC Markets offers a wide range of risk management initiatives.
Our order tickets automatically suggest a stop loss equal to your margin requirement for each trade (this feature can be turned off in the Preferences section). This feature is known as transaction based stop loss, and it can help to limit the downside risk associated with a trade. There are order types to enter the market, including limit and market order, as well as trailing stops and take profit orders that can be used to exit. CMC Markets offers a full range of order execution tools.
The CMC Tracker platform will attempt to notify you when your CFD account value falls to 50% of your margin requirement and suggests you might want to deposit additional funds or close out some of your trades. This notification is provided as a courtesy only and you must not rely on it as it is your obligation to monitor your CFD account.
The CMC Tracker platform may liquidate your positions at the close out level to protect both you and CMC Markets and to help prevent your account falling into a debit balance. It's up to you to monitor your positions. To prevent the liquidation of your positions, make sure you've deposited enough funds to keep your account value above the close out level. If your trade doesn't go as you expect, you may be required to deposit additional funds with CMC Markets in order to hold your position.