Spot trading is the purchase and sale of assets at current market prices with the intention of immediate delivery of the asset.
Energy spot trading is carried out through contracts for difference (CFDs). As a result, you do not need to own the asset, but can benefit from changes in the real-time price of the asset. In addition, you can trade larger volumes with less investment (margin). While this can lead to greater profits, it can also lead to increased losses, so you must invest and trade wisely.
To better explain this, let's take an example. Suppose you think the price of wheat is going to go up, so you buy into the spot wheat market (bearish). If the price of wheat goes up, you make a profit, but if it goes down, you lose money.
What is the most traded commodity in the world?
The most traded commodities by volume are US Crude Oil, Brent Crude Oil, Copper, Natural Gas and Agricultural products such as Coffee, Wheat and Sugar.
Why trade commodities through CFDs?
Trading commodities through CFDs allows you to:
- Choose between long and short positions
- Trade larger volumes with less capital
- Hedge your portfolio
- Make short-term gains
- Trade without owning the asset
- Trade only the price movement of an asset