Beginners' Guide to Commodities Trading in Malaysia

Categories: Gold and Commodities Trading  

Tags: Commodities Trading  Commodities Trading Malaysia  Gold Trading  Oil Trading  

Publish date: 2022-12-21

Beginners' Guide to Commodities Trading in Malaysia                 

  • What are Commodities?
    • Commodities Trading in Malaysia
      • Gold Trading
      • Oil Trading
    • Advantage of Commodities Trading
      • Diversification
      • Inflation Hedging
      • Leverage
      • Liquidity
    • Why Trade Commodities with FXCM?
    • How to Trade Commodities?
      • Commodities Futures
      • Trading commodities with CFDs
    • Alternative Ways to Invest in Commodities Trading
      • Physical Commodity
      • Commodities Stocks
      • Commodities ETFs and Mutual Funds
    • Risks of Trading Commodities
      • Leverage
      • High Volatility
      • Easily Influenced by Economical and Political Factor
    • Conclusion
    • Frequently Asked Questions (FAQ)
      • Should you trade commodities?
      • How to make money through commodities trading?
      • Which is a commodity exchange of Malaysia?

Commodities trading can be a very profitable investment and also bring about big losses. This article will teach you the basics of commodity trading so that you can make an informed decision.

What are Commodities?

Commodities are natural resources or raw materials that can be bought and sold in the financial market. They include things like agricultural products, precious metals, mineral ores, etc. which are mostly needed for various uses such as production of food, energy and clothing to supplement our daily life. One of the special features of commodities is that they are standardised on a global scale. This means the value of a unit of 2 same commodities has more or less the same price no matter where it is produced.

Some of the common categories and examples of commodities include:

  • Metals
    • Precious metals such as gold, silver and platinum, and industrial metals such as copper, aluminium and lead
  • Energy
    • Energy products like oil, coal and natural gas
  • Agricultural products
    • Agricultural product such as cocoa, sugar and wheat

Commodities Trading in Malaysia

Commodities markets are a centralized and liquid platform where producers and consumers of commodities can access them. They also use commodity derivatives to hedge future consumption or production. This creates opportunities for speculators, investors and arbitrageurs. The most popular known commodities markets in Malaysia is Kuala Lumpur Commodities Exchange (KLCE). One of the most common examples of commodities trading is gold trading and oil trading.

Gold Trading

Gold is a valuable commodity that is difficult to come by and is used in many industries. Traders buy and sell gold on the commodities market, which determines the price.

The price of gold can be high or low, depending on how much people want to buy it and how much people are selling it. Trading gold requires careful consideration due to the high volatility of the markets, which means that there is a lot of risk involved.

The biggest advantage of gold trading lies in its safety and reliability. Many traders and investors see gold trading as a safe and reliable way to make money. This is because the value of gold stays relatively stable in the face of changing economic situations, while the cost of gold tends to go up over time. This makes it possible for gold trading to be a significant help for traders who want to make a lot of money quickly.

Trading in gold online allows traders to produce extra cash faster than when they enter the supply marketplace. Additionally, it is important to note that the value of gold changes quickly and in large quantities, which increases the chance for traders to earn a lot of money in gold trading, but just as easily increases the chance to lose a lot of money.

Oil Trading

Oil has been used for centuries to produce energy in the modern economy. Petroleum, diesel, and heating oil are all products that result from refining crude oil.

Oil trading can be a highly profitable activity that involves the buying and selling of financial derivatives, such as stocks and bonds. The main reason to trade oil is its unparalleled liquidity; in fact, it's one of the most traded commodities on earth. This makes it very easy to get in and out of the market, which could give you plenty of opportunities to make money quickly or over time.

Different groups of traders are attracted to oil trading because it offers excellent opportunities for short-term speculation or hedging purposes. The major reason why oil trading is recommended is its liquidity. Due to oil trading mostly traded on CFDs with brokers, this allows a higher degree of liquidity compared to future contracts, resulting traders can open and exit trades at any time. Additionally, oil trading, like gold trading, is easy to speculate their price which are popular assets traded by most people.

Advantage of Commodities Trading


Diversification can be a great way to reduce risk and increase returns. By investing in several different financial instruments, you can reduce the chances of experiencing a loss, and potentially gain more than if you had invested all your money in one place. With online commodity trading, you can invest in a variety of safe commodities to reduce the risks of loss and maximise the returns.

When two countries get into a war, for example, stocks and bonds might be withdrawn from circulation and placed in commodities like gold or silver. Conversely, when the economy is doing well and companies are making large profits, investors might move their money into equities. Commodities can therefore help reduce your risk while maximizing your profits.

Inflation Hedging

Hedging against inflation, or in other words protection against inflation, can help to reduce the losses when inflation rate is rising.

In times of inflation, the prices of stocks fall as investors flee to commodity futures for safe commodities such as gold to protect their capital. This causes a decline in the income of companies and a decrease in profits for shareholders. In contrast, the prices of commodities used in manufacturing goods rise due to growing demand, ultimately resulting in higher prices for finished products.

By holding a commodity whose price is increasing, you will ensure that your purchasing power remains constant no matter the inflation rate. This helps safeguard your portfolio value against high inflation rates.


Commodity trading such as CFDs, options and futures can provide a high leverage value which as big as only paying 5% to 10% of the contract price as the upfront payment.

This allows investors to take larger positions with lesser capital, resulting in bigger profit or loss in a lower period of time.


Commodity investments are perfect for people who want to stay true to their values and still make some money. You can sell them anytime, making them a good option for people who want more control over their money. Just like stocks, commodity derivatives can be a safe bet because they offer authority over your funds.

Why Trade Commodities with FXCM?

FXCM Markets is a leading provider of online foreign exchange (FX) trading, contract for difference (CFD) trading, commodities trading, cryptocurrency trading and related services. Here's a list of why you should trade commodities with FXCM:

  • Wide range of instruments to choose from
  • Excellent trading offers
  • Professional tools provided

How to Trade Commodities?

Commodities Futures

The most common way to trade commodities is by buying and selling contracts on a futures exchange. This is how it works: you agree to purchase a commodity in the future at a set price, and then sell the same commodity at a future date. So, for example, you may buy 10 bullion of gold at $100 per bullion in 30 days’ time. At the end of the contract, you will either transfer physical goods or close out your position through the spot market. If the spot price is higher than your contract price ($100 per bullion), you will make money; if it's lower, you will lose money. On the other hand, if you had bought a contract to sell oil at $100 per barrel, your profits would be earned when the spot price goes down and losses incurred when it goes up. You can always close out your position before its expiration date should something change in the market such as oil shortage occured as an event.

With futures, you're betting on price changes only, not taking possession of the product. If you're interested in investing in futures trading, you'll need to set up an account with a brokerage account that offers this type of trading. You can open an account with FXCM to start commodities trading right away to try making money off of your bets.

Trading commodities with CFDs

With CFDs, you can trade commodities without the hassle of dealing with physical commodities.

CFDs make it possible to profit from price movements of a commodity without having to take delivery or arrange supply, which makes them an ideal way to hedge your investment portfolio against potential price swings.

There are typically no transaction fees associated with CFD trades, but there may be a ‘spread’ (the difference between the buy and sell prices) which you will need to pay.

Alternative Ways to Invest in Commodities Trading

Physical Commodity

Other than buying commodities with futures, purchasing commodity in physical form can be an alternative way to invest in commodities. Investors can take possession of physical precious metals like gold bars, coins, and jewelry. This is an important way to protect oneself from market volatility and ensure that one's holdings are secure.

With precious metals, the transaction costs can be higher than other investments. However, it is an excellent way to store the asset value by buying precious metal such as gold to act as safe haven especially in times of inflation. This strategy is only for value-dense commodities, such as gold and platinum.

Commodities Stocks

If you're looking to invest in a commodity, buying stocks of a company involved in that industry can be an option. For oil, this could include investing in an oil refining or drilling company. While for agricultural products, it can be investing into an agriculture business such as the one that sells seeds or milk.

These kinds of investments follow the price of the underlying commodity and are less risky than directly investing in the commodity itself. If oil prices go up, an oil company's stock price will likely increase too. But this goes both ways - while high oil prices could help an oil company's share price, there are other factors at play as well (like management and total market share), so it is recommended to always consult with your financial advisor before making any investment decisions.

Commodities ETFs and Mutual Funds

There are a variety of funds that invest in commodities, including mutual funds and ETFs. These funds allow people with a small investment to gain access to a wide range of commodities and make investments in companies that have commodity exposure.

Some fund managers use futures contracts to track the price of a commodity while others invest in the stock of different companies with commodity exposure. However, you will likely pay an additional management fee to these funds over what it would cost if you tried to invest on your own.

Additionally, depending on the fund’s approach, it may not track the price of a specific commodity perfectly.

Risks of Trading Commodities

1. Leverage

Online commodity traders typically get higher leverage than stock traders. However, higher leverage can be risky even though it can bring better profit when used properly. For example, you may lose money rather than earning profit when the market goes against your speculations.

Leveraging can be a powerful tool, but it comes with risks. As mentioned earlier, it can help to earn bigger profit by leveraging on the margin as little as 5%. However, if the margin requirement is low, the losses when the position goes against your prediction is much bigger as well, making leveraging a double edged sword. Low margin requirements also encourage risky behavior which can quickly wipe out your investments.

2. High Volatility

It can be tough to keep your investments on track when prices for commodities like crude oil, gold, and silver are soaring and then plunging all at once. This volatility can cause you to make bad decisions and potentially lose money.

3. Easily Influenced by Economical and Political Factor

As an online commodity trader, it's important to stay up-to-date on global political news and analyze economic indicators in order to make informed decisions about commodity prices. For example, when crude oil prices hit all-time lows during the COVID-19 pandemic, it was clear that the market was reacting to a number of geopolitical factors. Now that the pandemic is over, commodity prices are slowly but surely rising again. So be prepared for any potential changes by keeping tabs on current events and analyzing relevant data.


In a nutshell, If you're looking to make some serious cash from the commodities market, you'll need to be prepared for some tough work. But with sound judgement and a bit of luck, trading could become a very rewarding experience. So be sure to stay sharp and keep your eyes open - success in this arena is all about taking calculated risks.

Start commodities trading now with FXCM with excellent tools provided and multiple platforms of choice available, you can open a free demo account right away to venture into your journey of commodities trading now.

Frequently Asked Questions (FAQ)

Should you trade commodities?

If you're looking to trade commodities, it's important to have a strong understanding of the underlying supply and demand dynamics. By doing so, you can reduce your risk and could enjoy the rewards that come with commodity trading. However, be aware that commodity prices are highly volatile and subject to many outside factors. If you're looking to invest in a commodity for the long term, you can also find investments in commodities through stocks, mutual funds, and ETFs, these types of investments may be better suited for you.

How to make money through commodities trading?

As a commodity trader, it is important to have a clear understanding of your investment thesis and the market conditions in order to make smart trading decisions. Commodity traders can be speculators, betting on small movements in prices in order to earn profits. When they think prices are moving higher, they go long and take advantage of the potential for growth. When they believe prices are headed lower, they go short and try to profit from falling prices.

Which is a commodity exchange of Malaysia?

Established in 1980, the Kuala Lumpur Commodity Exchange (KLCE) was Malaysia's and Southeast Asia's first futures exchange. To help the exchange expand to financial futures, the Malaysian Monetary Exchange was established in 1996.