Commodities are raw materials or primary agricultural products that can be bought and sold in the financial markets. They are typically used in the production of other goods and services and are traded on commodity exchanges around the world. Some examples include metals (gold, silver, and platinum), energy sources (coal, crude oil, and natural gas), agricultural products (white sugar, corn, and wheat), and livestock and animal products (cattle, eggs, and milk).

Commodity trading involves buying and selling physical commodities or commodity derivatives, such as commodity futures, options, and CFDs. The value of commodities is driven by supply and demand dynamics, which depend on various factors, including but not limited to weather conditions, geopolitical events, and the health of the global economy. When traders participate in commodity trading, they attempt to profit from these price movements by buying low and selling high, or vice versa.

Some popular instruments in the commodity market include gold, crude oil, and natural gas. Gold has been a highly valued precious metal for centuries and today is considered a safe investment in times of economic uncertainty. On the other hand, crude oil and natural gas are vital energy sources that are in constant and high demand globally for transportation and heating purposes.

Commodity prices fluctuate due to supply and demand dynamics, which offers traders a chance to potentially profit from these price movements. Commodity trading also offers traders and investors the benefits of diversification, which can potentially reduce their overall portfolio risk or enhance returns. Finally, producers and consumers can manage price risk when they trade commodity derivatives, such as through CFDs, or options and futures contracts. With derivatives, they can secure favourable prices of commodities for future production and operations.