What is day trading in the commodity market? - Trading Class | Trading Courses | Webinars
  • No products in the cart.

Table of Contents
< Back to All Categories

What is day trading in the commodity market?

Understanding Day Trading in the Commodity Market

To gain a comprehensive understanding of day trading in the commodity markets, it’s crucial to delve into the intricacies of commodity trading and day trading and how these two financial strategies interlink in the fast-paced financial markets.

Defining Commodity Trading

Commodity trading involves the buying and selling of raw materials or primary agricultural products, commonly known as commodities. The market for commodities includes diverse products such as oil, gold, agricultural goods, and natural gas, amongst others. Traders buy these commodities on regulated commodities exchanges, with the goal being to make a profit.

An Introduction to Day Trading

Day trading, on the other hand, is a specific trading style that involves opening and closing positions within a single trading day. As such, the objective of day trading is to make quick profits from the small fluctuations in market prices that occur throughout the day. Most day traders work with highly liquid markets (e.g., Forex, indices, certain stocks, and, of course, commodities) that offer ample trading opportunities throughout each trading session.

Overlapping The Two: Day Trading in Commodity Market

So, when it comes to day trading in the commodity markets, it refers to the buying and selling of commodities like crude oil, gold, wheat, or natural gas within the same trading day. The aim is to make rapid trades that exploit the small intraday price fluctuations in the commodities market.

The Basics of Day Trading in Commodities

Understanding Commodity Price Fluctuations

Intraday commodity prices are influenced by an array of factors, from global economic reports and political news to weather forecasts and natural disasters. This volatility is what makes commodity trading appealing for day traders.

A Direct Access Broker

To become a commodities day trader, you will need a direct-access brokerage account. These accounts provide faster trade executions than typical online brokerage accounts, which is a significant factor when trading in a rapid-fire style like day trading.

Technical Analysis

Technical analysis tools such as chart patterns, volume, and technical indicators are essential elements in a day trader’s toolkit. These tools, when used correctly, help traders make informed decisions about when to enter and exit trades.

Trading Plan

Each day, a trader requires a trading plan or strategy in order to make systematic trading decisions and control risk. This plan generally includes the criteria for trade entries and exits, risk control measures, and other key trading rules.

High Leverage

Commodity day trading often involves using high leverage to increase potential profits. However, such leverage can work both ways and amplify losses, making strict risk management essential.

Risks & Rewards of Day Trading in Commodity Market

While day trading in commodities can be profitable, it’s not without risks. The majority of day traders operate on high financial leverage, which can magnify both profits and losses. This aspect of high-risk, high-reward necessitates a sound understanding of financial markets, excellent risk management skills, and a deep knowledge of the commodities being traded.

Furthermore, day trading commodities also requires a strong psychological temperament. Day traders need unfaltering discipline to stick to their trading plans, especially when markets are highly volatile.

The Rewards

Successful commodities Day traders can realize significant profits. Day trading’s advantage lies in the possibility of regular, even daily, profits due to the short-term nature of trades. Additionally, day traders are not susceptible to overnight market risk as they close out their positions each day.


In conclusion, day trading in the commodities market represents an exciting yet challenging arena in the trading world. To be successful, a trader needs to have a solid understanding of both the commodity markets and day trading strategies, along with a robust trading plan and rigorous risk management. With the right approach, patience, and discipline, a day trader can potentially achieve substantial returns in the commodity market. However, it’s crucial to remember that this involves significant risks and, as such, isn’t suitable for everyone.