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How to Get Started Trading Commodities With CFDs

Ossi Samuel

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CFDs

How to Get Started Trading Commodities With CFDs

Most people stick to stocks and bonds in their investing. But there are many other choices for investors to diversify their portfolios. Commodities were once thought to be limited to large institutional traders. But it’s easy to trade commodities today — even if it is not easy to make money doing so.

CFDs (contracts-for-difference) are a popular way to trade on commodities. Indeed, there has been a surge of interest in CFDs lately.

CFDs

What are Commodities?

Commodities are mainly products that we might use in our everyday lives and are traded on exchanges. The commodities that are traded can be subdivided into 5 categories:

  • Agriculture: Cocoa, coffee, corn, oats, soybeans, wheat, sugar, cotton, lumber, soybean oil, and frozen concentrated orange juice
  • Livestock: Hogs, pork bellies, cattle, and feeder cattle
  • Energy: Brent crude oil, West Texas Intermediate crude oil (WTI), ethanol, natural gas, heating oil, and propane
  • Precious metals: Gold, silver, platinum, and palladium
  • Industrial metals: Tin, lead, zinc, aluminum, cobalt, molybdenum, nickel, and recycled steel.

Commodities are traded on various exchanges but most people use brokerage firms. In addition to direct trading of commodities, there are also many commodity derivatives.

Commodity Trading Basics

Trading in commodities can be a good way to diversify your portfolio. And trading them may be simpler than you think. A lot of commodity trading is done with derivatives.

Futures traders, for example, often sell their contracts before the expiration date. Eventually, a trader that has a use for the commodity will take possession — like a food company that needs cocoa for their chocolate dessert products.

How to Trade Commodities

There are several instruments that are commonly used to trade commodities.

  • CFDs (contracts for difference) yield the difference in price between when the contract is made and its end. If the price is higher at the end, the trader makes money; if it is lower, they lose money.
  • ETFs (exchange-traded funds) are like mutual funds for one or more commodities.
  • Stocks provide ownership in companies that produce or extract commodities like gold or crude oil.
  • Futures allow the trader to buy a commodity at a later date at a price set at the time of the contract.
  • Options are contracts that give traders the right (but not obligation) to purchase a commodity at a later date. Because they pay a premium for the contract, the trader can still lose money if the commodity price goes up.

Commodity Trading With CFDs

CFDs are contracts between two people that are based on the price differences between the time that the contract is entered into and the price when the contract ends.

If the closing trade price is higher than the entry price, the buyer of CFDs will profit from the difference in these prices. The seller of the contract will then pay the buyer the difference.

If the closing trade price is lower than the entry price, the seller of CFDs will make money, because they sold or shorted the commodity. The buyer then pays the seller of the contract the difference.

When you trade CFDs, you are just speculating on the change in price, either up or down. You never own the actual commodity that you’re trading.

Examples of CFD Trades

Let’s say John has heard some news about the weather conditions in Nigeria. Since Nigeria is a large exporter of cocoa products, John wonders if he can profit from a rise in cocoa prices due to these weather conditions.

After analyzing the situation, John determines that these weather conditions could hinder the cocoa crop, causing a rise in cocoa prices. So he purchases a cocoa CFD. John’s profit will be the difference between the cocoa price when he bought the CFD and the price when the CFD is unwound (minus any commissions and fees).

Another example of trading CFDs; Bob has also heard that rainfall should be small throughout North African and the Middle East. He is interested in crude oil and believes that this will keep production high and prices low. So he would sell oil CFDs.

These examples show that it is possible to profit trading CFDs when a commodity price rises or falls. The hard part is knowing which direction the price will go.

Finding a Broker

Before you can trade, you will need to find a broker and get approved for trading in a margin account. Not all brokerage firms allow clients from every country.

For example, Plus500 does not accept clients from Nigeria. But there are brokerage firms that do allow customers from Nigeria, like eToro. Look around and choose the best one for your situation.

Note that many brokers offer demo accounts that allow you to try out CFD trading without risking any money. If you are new to trading, you should definitely use this service.

Pros and Cons of CFDs

There are advantages of trading CFDs over other forms of commodity trading:

  • CFDs have no expiration date, so you don’t have to be exact with your timing of price movements.
  • You can profit with either a rise or a fall in commodity prices.
  • You don’t need the full amount of money to trade CFDs, you can borrow a large portion by trading on margin.

But there are also disadvantages:

  • CFDs seem simple but they are actually derivatives that require knowledge and research.
  • You don’t own the underlying asset.
  • While trading on margin can allow you to make more money, it can also end up costing you more than you are aware you are risking.

Summary of Commodity CFD Trading

Contracts for difference (CFDs) let a trader speculate on the price movement of the commodity between the time the trade starts and ends. You can profit with rising or falling commodity prices and almost anyone can trade in commodity CFDs.

But don’t let the ease of CFDs confuse you. They are still derivatives that are very risky.

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Ossi Samuel is a mafian thinker, an avid reader and writer, and political analyst. Am a humanitarian and fun loving person. I love Tech by the way and will always have your time if you have any ideas. I can be reached on Facebook

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How To

How to Obtain NYSC Exemption Certificate In Nigeria

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Obtain NYSC Exemption Certificate In Nigeria

Processing NYSC Exemption Certificate could pose a challenge to you if you are oblivious of how to go about it. That is why I created this article to explain the entire process in detail, step-by-step. By the time you finish reading this, you should be able to process your NYSC exemption certificate by yourself.

Obtain NYSC Exemption Certificate In Nigeria

Here’s A Copy of NYSC Exemption Certificate (Sample)

Note: NYSC stands for “National Youth Service Corps”

Before I get to the bone of the talk, why would you or any Nigerian graduate want to get or process NYSC exemption certificate?

Here are the reasons:

  1. You are Thirty (30) years of age.
  2. You are a serving member or once served in any of the Nigerian armed forces like the Nigerian Army, the Nigerian Navy, or the Nigerian Air force. Or, it could be that you are a Nigeria Police Officer or served in the Nigeria Police for over Nine month.

If you are a member of staff of the following paramilitary organizations in the country, you would be ineligible to serve in the NYSC:

  • The Defence Intelligence Service,
  • The Nigerian Security Organization,
  • The National Intelligence Agency or
  • The State Security Service or.
  1. Finally, having been conferred with any National honour, you are ineligible for the NYSC.

If you belong to any of the categories above, you would have to get the Certificate of Exemption from the NYSC.

However, if you are a graduate from a Part-time programme you would be issued letter of exclusion and this is different from NYSC Exemption Certificate.

How to Become Eligible For NYSC Exemption Certificate

If you are a Nigerian graduate whether at home or trained oversea and you have the stipulated tertiary education qualification of B.Sc., B.A., or HND from an institution approved and accredited by NUC, NTBE, NCCE, then you are eligible for the NYSC Exemption Certificate.

However, if you are a foreign-trained graduate you must submit your certificate for Evaluation/Vetting at the mobilization Department of the NYSC Secretariat.

Processes for Collection of NYSC Certificate of Exemption

Home Trained Graduates

The process begins from the corps producing institutions.

  1. The Tertiary Institution attended. The school submits the masters list of their graduates alongside with the senate approved results to NYSC.
  2. A print-out is process by NYSC classifying those to be called up for service and those to be exempted. This print-out is sent back to the institutions for verifications and corrections after which they are returned to NYSC as an agreed/corrected document.
  3. Also, with the print-out, the certificate of exemption are produced, documented, and sent back to the institutions for issuance o the appropriate person.

N/B: Collection of the Certificate of Exemption for home trained graduates is only done in the institution of graduation and not in NYSC office.

Foreign Trained Graduates

  1. The process begins with the evaluation of credentials and other related documents i.e. international passport.
  2. After the evaluation of credentials the foreign trained graduate is then registered and this is physically done at the NYSC directorate headquarters, Abuja. It is at the point of registration that the classification of whom to be called-up or who to be exempted; is determined.
  3. Certificate of exemption are therefore produced for those exempted from the service.
  4. Such certificates of exemption for foreign graduates are to be collected at the NYSC directorate headquarters at the stipulated time communicated.

N/B: collection of the Certificate of Exemption is grouped under the three batches of the service year, depending on the date of the registration. This will be communicated to exempted graduates at the point of registration.

To Collect NYSC Certificate of Exemption, you must do it in person and must provide proper identification such as your international passport.

So, that’s all on how to process NYSC Exception Certificate. I hope this article was helpful.

Do you have questions or contributions to make to this? Please, let me know immediately by commenting below this article.

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