This guide covers 6 commodity price drivers, 3 instrument types, and a complete MT5 trade workflow. If you're trading forex and considering commodities, the crossover isn't as smooth as it looks.
Commodity prices move on weather events, inventory reports (EIA, USDA), OPEC decisions, and geopolitical disruptions, not interest rate differentials.
The setups that work on EUR/USD can blow up on crude oil.
Below, you'll find CFD vs futures vs ETF comparisons, leverage basics, and a step-by-step trade setup on VantoTrade MT5 with raw spreads from 0.0 pips. If you want a shorter practical walkthrough first, start with how to trade commodities online. Already comfortable with the basics? Jump to our commodities trading strategies guide for specific entry, exit, and risk rules.
By the end, you'll know how to place your first commodity CFD trade on MT5.
What Are Commodities?
Commodities are standardized raw materials that trade on global exchanges. Common examples include oil, gold, wheat, and coffee. They're interchangeable by grade, meaning one barrel of WTI crude is the same as any other.
Forex traders access commodities through CFDs, futures, or ETFs rather than taking physical delivery. Commodity prices also influence currency pairs directly. The Australian dollar, for instance, often tracks gold, while the Canadian dollar moves with crude oil.
Brokers offer commodities across four main categories:
- Agricultural: wheat, coffee, corn
- Energy: crude oil, natural gas
- Metals: gold, silver, copper
- Environmental: carbon credits
Energy and metals tend to get the most volume from retail traders. Agricultural commodities are thinner but can move sharply around harvest seasons and USDA reports.
Hard Commodities vs Soft Commodities
Hard commodities are mined or extracted natural resources like oil, gold, and copper. Soft commodities are grown or raised agricultural products like wheat, coffee, and cattle.
The distinction matters because each category responds to completely different forces. If you're coming from forex, hard commodities will feel more familiar. Soft commodities introduce variables like weather and harvest cycles that currency pairs never deal with.
Hard commodities include:
- Crude oil, natural gas
- Gold, silver
- Copper, iron ore, aluminum
Soft commodities include:
- Grains: wheat, corn, soybeans
- Cash crops: coffee, cocoa, sugar, cotton
- Livestock: live cattle, lean hogs
Hard commodity prices track industrial demand, economic cycles, and geopolitical disruptions. Copper rises when manufacturing expands. Oil spikes when OPEC cuts supply or sanctions hit a producer.
Soft commodity prices depend on weather, growing seasons, and crop yields. A drought in Brazil can move coffee prices more than any central bank decision. These biological and seasonal factors are something forex traders rarely encounter, so expect a learning curve.
How Does Commodity Trading Work?
Commodity trading works by speculating on raw material price movements using derivatives like CFDs, futures, or ETFs - without owning or delivering physical goods.
The mechanics are similar to forex. You go long (buy) expecting prices to rise or short (sell) expecting them to fall, using leveraged positions. No ownership of the underlying asset is involved.
The key difference is what drives price. Forex pairs move on interest rate differentials, central bank policy, and economic data.
Commodities respond to physical supply-and-demand factors - weather disruptions, inventory reports, geopolitical tensions, and seasonal production cycles.
The most common instruments for retail commodity trading:
- CFDs - the easiest transition for forex traders, since the platform experience is nearly identical
- Futures - standardized contracts traded on exchanges like CME and ICE, with set expiry dates
- ETFs - fund-based exposure without direct leverage, such as GLD (gold) or USO (oil)
- Options - contracts giving the right (not obligation) to buy or sell at a set price
Most forex traders start with CFDs because the margin structure and order types work the same way.
CFDs vs Futures vs ETFs: Which Path Suits You?
CFDs are the easiest crossover for forex traders. Futures and ETFs each have a place, but they solve different problems.
Here's how the three stack up:
CFDs run on the same platforms (MT5), same order types, and same margin mechanics forex traders already use. The learning curve is almost zero.
No expiry dates, no rollover headaches. You hold a position as long as you want, with overnight financing as the only ongoing cost.
Position sizing is flexible too - trade micro-lots of gold or oil instead of committing to a standardized futures contract. On VantoTrade's MT5, commodity CFDs sit right alongside your forex pairs in the same account.
Futures trade on regulated exchanges like the CME and ICE with centralized clearing. Counterparty risk is lower than with OTC CFDs because the exchange guarantees every trade.
The tradeoff: capital requirements are much higher. One WTI crude oil futures contract represents 1,000 barrels, so even small price moves create large P&L swings. Futures suit traders who need exchange-level transparency and can handle bigger position sizes.
ETFs like GLD (gold) and USO (oil) trade like stocks. No leverage, no margin calls, and they work best for buy-and-hold investors who want commodity exposure without active position management.
The downsides are real, though. No short-selling flexibility, trading only during market hours, and some commodity ETFs suffer tracking error from futures roll costs.
For active traders used to forex-style execution, CFDs give you more control over timing and direction.
Understanding Leverage and Margin
Leverage lets you control a larger commodity position with a smaller deposit (margin), amplifying both gains and losses proportionally.
Margin is the deposit your broker holds to open a leveraged position. The higher the leverage, the less margin you need upfront.
With 1:500 leverage on a gold CFD, every $1 in margin controls $500 in market exposure. A 1% price move against you wipes out 5x your deposited margin, so position sizing matters from the start.
Commodities carry sharper leverage risks than forex pairs. Crude oil moves 3-5% in a single day, while EUR/USD rarely exceeds 1%. One standard WTI futures contract covers 1,000 barrels, so even small percentage swings translate into large dollar moves.
Overnight gaps add another layer. EIA inventory reports and OPEC announcements release outside trading hours, and prices jump past your stop-loss to fill at a worse level.
Start with small position sizes relative to your account balance. VantoTrade offers 1:500 leverage on its MT5 platform with raw spreads from 0.0 pips and a $25 minimum deposit, but using full leverage on your first trade is a fast way to blow your account.
Keep effective exposure at 2:1 to 5:1 while you learn how commodity prices react to news events. VantoTrade's 50% stop-out level closes positions automatically before your balance hits zero, but that protection works best when you're not over-leveraged to begin with.
Why Commodities Move: Key Drivers and Risks
Commodity prices are driven by supply and demand dynamics, which are influenced by macroeconomic factors, geopolitical events, weather patterns, and production capacity constraints.
Commodity prices move on the same forces as any market: supply, demand, and sentiment. The difference is that supply has physical limits.
New mines take years to develop. Wheat follows a fixed growing season. In forex, central banks shift currency supply through interest rate differentials. Commodity producers have no equivalent lever.
Geopolitical events, weather patterns, and macroeconomic shifts like inflation or rate hikes all pressure prices. When a supply shock hits, producers can't ramp up output overnight, so commodity prices spike harder and longer than forex pairs.
Why traders use commodities (diversification, inflation, volatility)
Traders use commodities for portfolio diversification, inflation hedging, and volatility-driven trading opportunities since commodities often move independently of stocks and currencies.
Commodities have low or negative correlation with stocks and bonds. When equities drop, gold and oil prices move independently or rise.
For forex traders, adding gold or oil CFDs creates exposure to supply-and-demand dynamics rather than interest rate differentials alone.
Commodity prices rise alongside inflation because they represent physical goods. As currency purchasing power drops, the cost of oil, wheat, and metals climbs in nominal terms.
Interest rates and inflation levels feed directly into commodity pricing, so traders use raw materials as a hedge when central banks signal loose monetary policy.
Supply shocks from geopolitical conflicts, sanctions, or extreme weather trigger sharp price moves within hours. Short-term traders capture these directional moves through commodity CFDs.
Gold and oil are the most liquid commodity CFDs, with tighter spreads and more reliable execution than agricultural or industrial metals contracts during volatile sessions. If you're deciding between precious metals, our gold vs silver comparison breaks down when each metal makes sense.
Macro & rates: growth, inflation, central banks
Economic growth drives commodity demand, inflation erodes currency value making tangible assets attractive, and central bank rate decisions influence borrowing costs and currency strength.
Economic growth drives demand for raw materials. When manufacturing expands, factories consume more copper and oil. When GDP contracts, demand drops and prices follow.
Both commodities track manufacturing PMI and GDP growth closely. Copper goes into wiring, electronics, and construction, while oil fuels transport and industrial production. A rising PMI generally signals higher consumption of both, and a falling PMI suggests the opposite.
When inflation rises, each unit of currency buys less. Tangible assets like gold and oil tend to hold value better than cash in those conditions, which is why traders often rotate into commodities during inflationary periods.
Gold is the classic example. Rising global inflation can push traders toward gold as a store of value, driving its market price higher even before central banks respond with policy changes. For current analyst targets and price scenarios, see our gold price predictions for 2026.
Central bank rate decisions hit commodities through two channels: opportunity cost and the US dollar.
Higher interest rates make bonds and savings accounts more attractive relative to gold, which pays no yield. Holding gold during a rate-hike cycle means giving up that income, so demand often weakens.
At the same time, higher rates typically strengthen the USD. Since most commodities are priced in dollars, a stronger dollar makes them more expensive for foreign buyers, which can push prices down further.
US dollar effect (why a stronger USD can pressure many commodities)
Most commodities are priced in USD, so when the dollar strengthens, commodities become more expensive for non-US buyers, reducing demand and pushing prices down.
Oil, gold, copper, and most agricultural commodities are quoted in US dollars. This convention traces back to the Bretton Woods era and the dominance of US-based exchanges like NYMEX and COMEX.
When the dollar strengthens, non-US buyers pay more in their local currency for the same barrel or ounce. Even if the USD price of crude stays flat, a rising DXY means a European or Asian importer's effective cost goes up.
Keep the DXY (US Dollar Index) chart open next to your commodity watchlist. DXY and commodities like gold and crude oil tend to move in opposite directions, so a dollar rally often lines up with commodity pullbacks.
Fed interest-rate decisions are the shared catalyst. The same announcement that drives EUR/USD lower on a hawkish surprise will typically push gold and oil down too. If you already track rate decisions for forex, you're watching the right economic calendar for commodities:
- Rate hike or hawkish hold pushes USD up, pressures gold and oil
- Rate cut or dovish signal weakens USD, tends to lift commodities
Supply & demand basics: production, consumption, spare capacity
Commodity prices move when production, consumption, or spare capacity shift—tighter supply or stronger demand pushes prices up, while oversupply or weak demand pulls them down.
Output levels from major producers set the baseline. Three factors matter most:
- OPEC+ oil quotas cap how much member nations pump
- Mining yields determine copper and lithium flow
- Harvest volumes for wheat or coffee depend on acreage and growing conditions
Even when capacity exists on paper, disruptions shrink real output. A labor strike at a Chilean copper mine, an export ban on Indonesian nickel, or equipment failure at a refinery can each pull supply offline within days.
Economic growth cycles are the primary demand driver. When GDP rises, factories consume more steel, power grids burn more natural gas, and consumers buy more fuel. Recessions reverse the pattern.
Longer term, emerging-market industrialization reshapes entire commodity classes. China's infrastructure build-out from roughly 2000 to 2020 turned the country into the world's largest importer of copper and iron ore.
Spare capacity is the gap between what producers could output and what they are outputting. It acts as a price buffer. When spare capacity is large, a sudden demand spike gets absorbed without major price movement.
When capacity is tight, a small uptick in demand or a single supply disruption can trigger outsized price swings. That is why traders watch OPEC's spare oil production capacity so closely: low spare capacity signals that any unexpected demand increase could cause a supply crunch.
Inventory data & reports (EIA, OPEC, USDA): what to watch
EIA weekly oil inventories, OPEC monthly reports, and USDA crop reports are the key data releases that signal supply-demand shifts before prices move.
The EIA Weekly Petroleum Status Report drops every Wednesday at 10:30 AM ET. It covers US crude oil, gasoline, and distillate inventories.
The key signal in this report is whether inventories show a build or a draw. A build (rising stocks) means supply is outpacing demand, which typically pressures prices down. A draw (falling stocks) suggests stronger demand and supports prices.
The size of the build or draw matters too. A small, expected build barely moves the market. A surprise draw of several million barrels can send crude prices jumping within seconds of release.
Oil traders treat this report as the week's most important scheduled data point. The American Petroleum Institute (API) publishes its own inventory estimate the evening before, so Tuesday's API number often sets expectations for Wednesday's official EIA figure.
The OPEC Monthly Oil Market Report includes production quotas, compliance data, and global demand forecasts. Policy signals in this report can move oil prices before any physical supply change hits the market.
Compliance data is especially telling. When member countries consistently produce above their quotas, it signals that actual supply is higher than the agreed target. Downward revisions to demand forecasts tend to weigh on prices even if current production stays flat.
Watch OPEC+ ministerial meetings closely. Decisions on production cuts or increases often trigger immediate price reactions, sometimes within minutes of the announcement. These meetings are scheduled in advance, so you can prepare for the volatility.
Two USDA reports matter most for agricultural commodities:
- WASDE (World Agricultural Supply and Demand Estimates): Released monthly, covering corn, wheat, and soybeans. Production and stock estimates move grain and oilseed prices directly. Pay closest attention to revisions in ending stocks, the amount of supply left at the end of a marketing year. A surprise drop in ending stocks is one of the strongest bullish signals in grain markets.
- Crop Progress Reports: Published weekly during growing season, tracking planting pace and crop condition. Poor conditions signal potential supply shortfalls and push prices higher.
Both reports follow a fixed schedule published by the USDA, so you can plan around release dates and manage your exposure ahead of time.
Seasonality & weather (especially energy and agriculture)
Seasonal cycles and weather events drive predictable demand shifts and unpredictable supply shocks in energy and agricultural commodities.
Natural gas follows a predictable annual cycle. Demand rises in winter for heating and again in summer for cooling, when air conditioning loads strain power grids.
Traders use these patterns to position early. Shorting natural gas ahead of a mild December-February stretch, for example, is a common bet on lower-than-expected heating demand.
Grains like corn and wheat see the most volatility during two windows: planting season and harvest. Weather uncertainty during these periods can shift yield expectations overnight.
Wheat traders watch USDA crop reports closely and adjust positions based on projected yields. A poor planting season in the U.S. Plains or the Black Sea region can tighten global supply forecasts within weeks.
Unexpected weather events can move commodity prices fast because they hit the supply side directly.
- Drought and wheat: Extended dry conditions reduce wheat yields, prompting traders to buy futures in anticipation of supply shortages
- Brazil coffee harvests: If Brazil (the world's largest coffee producer) gets optimal weather, bumper harvests push supply above demand and prices drop
- Floods, hurricanes, frost: Extreme weather disrupts both production and transportation, tightening supply before markets can adjust
Geopolitics & shipping: sanctions, wars, choke points
Sanctions, conflicts, and shipping bottlenecks at key choke points can disrupt supply chains and trigger sharp commodity price spikes.
Commodity production is concentrated in a small number of regions. Russia and Ukraine are major wheat and energy exporters. The Middle East holds the bulk of proven oil reserves.
When conflict hits one of these regions, supply drops while demand stays the same. Prices move fast.
Three waterways carry a disproportionate share of global trade:
- Strait of Hormuz: roughly 20% of the world's oil passes through this narrow channel between Iran and Oman
- Suez Canal: connects the Mediterranean to the Red Sea, shortcutting Europe-to-Asia shipping by thousands of miles
- Strait of Malacca: the main route for oil heading to China, Japan, and South Korea
A blockage or military escalation at any one of these points can spike commodity prices within hours.
Sanctions pull major producers out of global markets. When Western governments sanctioned Russian oil and gas in 2022, Europe lost its largest energy supplier almost overnight.
European natural gas prices surged as buyers scrambled for alternatives from the US, Qatar, and Norway. The effects lasted well beyond the initial shock.
Beginner risk checklist: volatility, gaps, leverage, roll/financing costs
Before placing your first commodity trade, check four risk areas: price volatility, gap risk, leverage exposure, and roll/financing costs. Each one can drain an account faster than a bad forex trade if you're not prepared.
Commodities are significantly more volatile than most forex pairs. Oil and natural gas regularly move 3-5% in a single session on inventory reports or OPEC headlines. A major forex pair typically moves a fraction of that per day.
- Geopolitical events, weather, and regulatory changes all trigger sudden price swings
- Agricultural commodities spike on drought or frost reports
- Size your positions to survive a 5% adverse move without a margin call, and use a stop-loss on every trade
Price gaps happen when a market opens at a different level than where it closed, usually after weekends, holidays, or major news. Your stop-loss may execute at a worse price than you set.
- Energy markets are the most gap-prone because OPEC decisions and geopolitical developments land over weekends
- Gold gaps less often but reacts sharply to Fed announcements
- Reduce your position size before weekends or major inventory reports if you're holding commodity CFDs overnight
Leverage multiplies both gains and losses. A 10:1 position that drops 10% wipes out your entire margin. A 3-5% daily move in oil at 10:1 leverage becomes a 30-50% swing on your capital.
- VantoTrade offers leverage up to 1:500 with a 50% stop-out level, so your position closes automatically before the account hits zero
- Start with 5:1 or less on commodities until you understand their daily ranges compared to forex pairs
- Lower leverage gives you room to hold through normal volatility without triggering a margin call
Holding commodity CFDs overnight means paying daily financing (swap) charges. These fees add up quickly on multi-week holds, which is why short-term trades often make more sense for commodity CFDs.
- Check swap rates in MT5 before entering a trade: right-click the symbol → Specification
- Positive swaps occasionally exist on the short side, but don't count on them for most energy and metals contracts
- Factor financing costs into your trade plan, especially if you expect to hold a position for more than a few days
Place Your First Commodity CFD Trade on VantoTrade
Start with a free demo account to practice commodity CFD trades risk-free. When you're ready, fund a live account for as little as $25.
VantoTrade runs on MT5 with leverage up to 1:500. Choose between a Standard account (no commission) or a Raw account with spreads from 0.0 pips and commissions from $3.50 per lot per side.
Verification is automated and takes under 60 seconds.
Open a VantoTrade account and place your first commodity CFD trade today.
Frequently Asked Questions About Commodities Trading
Which commodity is best for trading for beginners?
Gold (XAU/USD) is the best commodity for beginners to start trading. It has deep liquidity, tight spreads, and price movements that follow clear macro themes like inflation and US Dollar strength. Our spot gold trading guide for beginners covers everything you need to get started.
Gold trades nearly 24 hours on weekdays with consistently tight spreads, so order execution stays predictable. Its price also moves inversely to the US Dollar, which gives forex traders a familiar reference point when reading gold charts.
WTI Crude Oil works as a second commodity to explore, but it moves faster than gold. The higher volatility creates more trade setups, though beginners should use tighter stop-losses and smaller position sizes to manage the wider price swings.
Stay away from soft commodities like Cocoa or Orange Juice. These markets have lower liquidity and are prone to sudden price gaps caused by weather events or crop reports, making risk management unreliable for newer traders.
Start with one commodity. Learning how a single market reacts to news, session opens, and technical levels builds pattern recognition faster than splitting attention across multiple instruments.
What are the 4 types of commodities?
The four types are energy, metals, agricultural products, and livestock.
- Energy: Crude oil (WTI and Brent), natural gas, and heating oil. Prices are highly sensitive to geopolitical events and OPEC decisions.
- Metals: Split into precious (Gold, Silver, Platinum) and industrial (Copper, Aluminum, Zinc).
- Agricultural (Softs): Coffee, cocoa, sugar, wheat, and corn. Prices are driven largely by weather patterns and seasonal cycles.
- Livestock: Live cattle, feeder cattle, and lean hogs. Less common in retail CFD trading but still part of the global commodity market.
Gold (XAUUSD) and Oil (WTI or Brent) are the standard starting points. Both offer high liquidity and tight spreads, which makes them easier to enter and exit than niche commodities like lean hogs or cocoa.
Can I make money trading commodities?
Yes, but losses are equally possible. Commodities trading through CFDs lets you profit when you correctly predict price direction, and leverage amplifies both your returns and your losses.
You profit by correctly predicting whether an asset like Gold or Oil will rise or fall, without owning the physical commodity. CFDs let you go long (buy) if you expect prices to rise, or go short (sell) if you expect them to drop.
Leverage does both. A small price move creates a larger percentage gain on your initial margin deposit, but the same applies to losses.
For example, 1:20 leverage means a 1% price move equals a 20% change in your position value.
Volatility is the biggest risk. Unexpected events like geopolitical conflicts or surprise economic data trigger sharp price swings, leading to margin calls or stopped-out positions.
Never risk more than you can afford to lose.
Start with a demo account to practice reading price action and managing risk before committing real capital.
What are the commodity market trading hours?
Commodity markets trade nearly around the clock, typically 23 hours a day, 5 days a week. A one-hour daily break (usually 5:00 PM to 6:00 PM EST) pauses trading for clearing and system maintenance.
Spreads often widen just before and after the daily break due to thinner liquidity. Avoid opening new positions within 15 minutes of the close or reopen if you want tighter pricing.
Gold and Silver (XAU/XAG) see peak liquidity during the London-New York overlap, roughly 8:00 AM to 12:00 PM EST. WTI Crude Oil volume spikes during the US pit session and around weekly EIA inventory releases (Wednesdays at 10:30 AM EST).
