How To Start Commodities Trading In Australia: A Beginner's Guide

If you're interested in commodities, stocks, and financial markets and possess good communication skills, consider a career as a commodity trader.

These independent agents connect buyers and sellers, negotiate sales, and facilitate transactions through established markets. They also handle tasks like arranging mortgages and insurance for clients. 

To become a commodities trader, acquire a VET or university qualification in commerce, economics, finance, accounting, or actuarial studies, and register with the Australian Securities & Investments Commission for licensing.

Explore this blog for insights on the job, everyday duties, purchasing commodities, becoming a commodities trader in Australia, and more.

If you still need a trading account to buy commodities, consider eToro, used by many investors in Australia and worldwide. You can create an eToro trading account HERE.

eToro AUS Capital Ltd ACN 612 791 803 AFSL 491139. OTC Derivatives are speculative and leveraged. Not suitable for all investors. Capital at risk. See PDS and TMD

Buy Australian & international shares with unlimited commission-free trades. (No brokerage). Other fees may apply.

1. What Are Commodities?

Commodities represent goods or assets with monetary value that can be bought or sold.

In Australia, the following commodities are exchanged both in person and online:

• Agricultural Goods: This includes agricultural products such as corn, coffee, cocoa, wheat, soybeans, sugar, grains, fruits, vegetables, and livestock products, such as eggs, meat, poultry, milk, and cattle

• Metals: This includes precious metals such as gold, silver, palladium, and platinum and common metals such as iron ore, zinc, nickel, copper, aluminium, and steel.

• Energy: Goods utilised for commercial power generation, such as electricity, Brent crude oil, WTI crude oil, natural gas, ethanol, and electricity.

2. What Is Commodities Trading?

Like stocks, commodity traders trade commodities and buy or sell for institutional investors, corporate clients, or retail traders. In Australia, commodities are bought and sold on the ASX exchange. 

The Australian Securities and Investments Commission regulates exchanges and brokers, which oversees financial service providers. 

Depending on the markets and conditions, you can trade commodities for a shorter or longer duration.

3. What Is A Commodities Trader?

Commodities traders are independent investment brokers who buy and sell various commodities over multiple exchanges. They provide financial planning services and execute trades in different markets.

These licensed professionals thoroughly understand the price of goods and the factors that influence their price. 

They negotiate sales through established physical marketplaces where bidding happens on the "exchange floor" or through a virtual exchange where the commodity exchange is online.

International commodity brokers broadly understand the global trading centres and physical commodity markets. They offer trading advice to their clients who trade beyond domestic markets.

4. Commodity Trader Job Description

• Use financial publications to analyse market conditions and trends. 

• Make fast decisions about buying or selling raw products or physical goods from the marketplace.

• Follows the market cycles and economic factors that impact the supply and demand for a commodity, such as politics, retail spending, and weather conditions. 

• Research specific commodities and market conditions and trade them across national and overseas exchanges.

• Compute and record the cost of transactions

• May perform spot trading, where the goods are delivered instantly, as opposed to future delivery.

• Operate software platforms and tools to perform option trading

• Promote services to new and current clients

• Network with investment professionals and other traders 

• Communicate with clients throughout the execution of trades

• Offer advice to clients concerning the purchase and sale of commodities.

• Understand futures contracts

• Develop connections within relevant industries

• Stay up-to-date on recent industry developments. 

5. What Skills Do You Need To Become A Commodities Trader?

Commodity trading is a specialised role within the financial industry. Critical evaluation of market trends, quick thinking, and customer service abilities are the basic skills you need to work in this profession.

In addition to these, you will also need good technical knowledge and soft skills such as:

• Knowledge of investment formulas to decide on buying or selling items based on their existing value 

• Good understanding of financial markets and commodities trading processes 

• Knowledge of sales techniques to initiate a sales call and network with existing leads to find new customers

• Decision-making skills

• Confidence 

• Clear speaking tone

• Effective verbal communication to interact with financial professionals and clients to execute complex deals in real-time

6. Qualifications For Commodity Traders In Australia

To become and work as a commodity trader, you usually need to study for a VET or university qualification. Some of the recommended options are:

• Bachelor's in Commerce – UNSW Sydney

• Bachelors of Commerce (Finance and Financial Planning)

• Bachelor's in Economics – The University of Sydney

• Bachelor of Actuarial Science – UNSW Sydney

• Bachelor of Accounting – Western Sydney University 

• Diploma of Accounting – Victoria University 

Consider gaining relevant work experience

Register with the Australian Securities and Investments Commission (ASIC) and get licensed before offering paid trading services.

7. Steps To Become A Commodities Trader In Australia

To work in commodities trading, you must follow multiple steps, including qualifying, gaining on-the-job experience, and obtaining a license.

Here are the steps to start your profession as a commodities trader:

Step 1: Create an Account With A Regulated Platform

Find an ASIC-regulated trading platform like eToro to learn how commodity trading works.

If you still need a trading account to buy commodities, consider eToro, used by many investors in Australia and worldwide. You can create an eToro trading account HERE.

eToro charges zero brokerage for stock trading. The trading platform offers extensive trading features, social trading tools, and copy trading to imitate the trades of other famous traders. 

Buy Australian & international shares with unlimited commission-free trades. (No brokerage). Other fees apply.

eToro AUS Capital Ltd ACN 612 791 803 AFSL 491139. OTC Derivatives are speculative and leveraged. Not suitable for all investors. Capital at risk. See PDS and TMD

Numerous trading platforms allow trading commodities using a demo account, allowing you to practice trading strategies without risking real money.

It is crucial to dedicate ample time to comprehend market behaviour, analyze data, and experiment with technical charts, tools, indicators, and trading strategies.

Step 2: Understand Commodity Trading

You usually need a VET qualification or a university degree in commerce, finance, economics, or a related field to work for a company.
 

The course gives an overview of the finance sector, the current economic structure of domestic and global markets, financial instruments, financial ratios, investments, stocks, commodities, trading, and more. 

This knowledge will be a base for learning how to trade commodities in the market.

Step 3: Learn About Commodities

There are many commodities to trade in Australia. Start by identifying the one that interests you, has high liquidity, and has a decent trading volume.

Understand the market, factors that impact the trade, past performance, and trends. After you know the commodity you want to trade, it is time to learn how to trade in the market.

Step 4: Gain Commodity Trading Experience

To gain confidence and develop specialised trading knowledge, you can consider working as a junior futures trader in a commodity trading company.

Working in the commodities trading industry and dealing with individual clients will help you gain market knowledge and prepare you to work independently for clients. 

Moreover, work experience will also help you qualify for the licensing exam. Many large firms also offer internship programs helping to build knowledge and make professional connections with the company to increase your chances of getting hired.

Step 5: Register For A Commodities Trading License

You need to be licensed to work as a commodity trader in Australia.

To gain registration, students should undertake a professional year that involves 100 hours of training after they complete their studies. Further, they also must pass the Financial Adviser Standards and Ethics Authority exam.

Obtain an Australian Financial Services (AFS) license from the Australian Securities and Investments Commission to become a licensed commodities trader.

Step 6: Apply For Jobs

Many firms look for beginner traders to service smaller trading accounts. 

After learning and practising on the job in commodity trading, traders can seek job positions for financial institutions that serve larger trading accounts.

Step 7: Consider Specialisation

Experienced traders can consider advancing their careers by specialising in the following fields:

• Media Buyer

• Energy Trader

• Livestock Trader

• Grain Buyer

• Wool Broker

8. Commodities Trader Work Environment

Commodity traders work in professional settings, including commodities exchange floors, trading rooms, and corporate offices. They work for futures commission merchants or stockbroker firms.

A Commodities trader job is fast-paced and requires making quick trading decisions based on the trends of the market and client interests.

They usually work on days when commodity markets are open, Monday to Friday, during standard trading hours. Commodities traders often deal with bulk money.

They may work in a stressful environment that expects them to facilitate profitable commodity trade transactions. Commodities traders also work with executive management to strategise and complete trades for large-scale clients.

The job may require standing or sitting for prolonged durations when working in commodity exchanges. Most commodities traders travel to visit their clients and discuss their trade objectives. 

As the job offers flexibility to work independently, they can offer their services from any part of the state.

9. What Is Commodity Trader Salary In Australia?

The national average commodities trader salary is $86,491 per year.

However, commodities traders who operate independently and don't work for firms have the potential to earn even higher incomes due to the direct nature of their trading. These independent traders can capitalise on their own opportunities, potentially surpassing the average salary. (no guarantee)

Apart from individual trading performance, experience, and expertise, the size of the brokerage firm also plays a significant role in determining Australia's overall financial broker salary.

Traders associated with larger and more prominent brokerage firms may enjoy higher earning potentials and benefits than those with smaller firms.

10. Job Outlook For Commodity Traders In Australia

The commodities market has been there since time immemorial. From the continents to oceans, traders have transported commodities to nooks and corners of the planet. As the oldest market, commodities trade in large volumes daily.

Technology advancement has taken commodity trading to a new level. Gone are the days when people stockpiled innumerable oil, metals, or natural gas barrels. 

Modern-day commodities markets have simplified commodity trading to a great extent. With cutting-edge technologies and tools, you can trade commodities in the form of financial derivatives.

Thus, you no longer must travel long distances to exchange tradable assets physically. With just a few clicks, you can participate in the thriving global commodities market and trade commodities CFD contracts at your convenience.

High growth prospects, hedging against inflation, a high Return on Investment, diversification, and ease of trading have made traders actively engage in commodities trading.

According to the national job outlook service, Commodities Traders grew moderately over the last five years. Due to huge interest and high demand among traders, you can expect a stable rise in commodity traders and job openings.

Commodities Traders are in demand all over Australia, particularly in industries related to Wholesale Trade, Forestry and Fishing, Agriculture, and Scientific and Technical Services.

Around 87% of workers work full-time for approx. 47 hours per week. 29% of workers are female, and the average working age in this profession is 39 years.

11. FAQs On Commodity Trading In Australia

What Are The Ways To Trade Commodities In Australia?

There are two ways to own a physical commodity: Exercised Options and Future Contracts.

Buying a commodity in physical form attracts storage and transport costs that many retail investors cannot afford. It is the reason why they turn to options and contracts.

You can trade commodities via an online trading platform. However, brokers charge a specific fee in commissions, deposit fees, withdrawal fees, overnight fees, and inactivity fees to use the platform. 

Additionally, brokers charge a research fee to provide advanced data on commodities for more informed trading.  

What Tools And Technologies Do Financial Brokers Use?

Commodities traders spend most of their time in front of computers, handling client calls and working on data management and financial tracking software. 

When travelling or away from the office, they stay in touch with their clients through mobile phones and laptops.

How To Trade Commodities In Australia?

You can trade in commodities in Australia through futures exchanges, such as the Australian Securities Exchange. It offers futures contracts on various physical commodities. 

Using this exchange platform, users can also speculate on the value of a commodity through other derivatives markets.

Tips To Trade Commodities On The Exchanges

New to commodity trading? Don't worry. Here are some tips that will help you while trading:

• Only invest what you can afford to lose.

• There are plenty of commodities you can trade in Australia, including grains, livestock, metals, and energy. Identify the one that interests you and gain extensive knowledge and skills.

• Study the commodity industry, and understand the market, its volatility, and potential market cycles to identify the right time to enter the market and the right way to trade the commodity.

• Learn how to use technical charts and trading tools to form the right strategies  

• Maintain a record of your trades, finances, and other information that will help you in the future.

• Have risk management strategies like Stop Losses to shorten your losses while trading. 

• Keep experimenting with new trading styles and improvising your skills and knowledge.

Why Should You Trade In Commodities CFD?

Commodities are a viable way to diversify your financial portfolio. They form a volatile segment of foreign and domestic economies. They are effective in earning money and hedging.

However, please remember that CFD trading is risky, and you may lose more money than you have invested. This investment method is only suitable for the most experienced traders. Beginners should be cautious.
 

Here are a few advantages of commodity CFD trading (Contract For Differences):

• No purchase of physical commodities, no storage costs, no transportation costs of merchandise and goods, and no maintenance.

• You can use Financial leverage (very risky - you can lose more than you have invested)

• Fast and easy execution of commodity trades

• Choose long or short trades based on falling or rising market conditions.

• Choose your preferred assets from a multitude of assets.

What is a Commodity Trader Career Path In Australia?

Commodity Traders usually start their career as Junior Commodity Traders and gradually climb the career ladder to pursue the following roles:

• Commodity Trader

• Commodity Advisor

• Assistant Manager - Commodity Research Manager

• Senior Associate - Commodity Trader

• Commodity Specialist

Is Commodity Trading Legal In Australia?

Yes, it is legally allowed to trade in commodities in Australia.

However, only those brokers registered with the Australian Securities and Investments Commission can practice. 

If you want to start commodity trading, pick a licensed broker to ensure you have ASIC's consumer protection.

Do You Need To Pay Tax For Commodity Trading In Australia?

Yes, In Australia, commodity trading activities such as options, CFDs (Contracts-for-Difference), futures, and physical transactions like valuable metal contracts come under the Taxation of Financial guidelines. 

It implies that you are liable to pay Goods and Services Tax on traded commodities.

How Much Capital Do I Need To Begin Commodity Trading In Australia?

The minimum deposit you need to trade in commodities in Australia depends on the trading platform you choose.

• eToro requires a minimum first deposit of $50

• AvaTrade and Plus500 need a minimum first-time deposit of $100

• City Index has no minimum deposit requirement

Where Can You Buy Bullion In Australia?

Many bullion dealers in Australia offer trading in gold, silver, platinum, and palladium. BullionVault, Perth Mint, and Australian Bullion Company are some places where you can buy and sell valuable metals online or in person.

Are Commodities Risky To Trade?

Yes. Commodities trading carries inherent risks. Besides the standard market volatility, various external factors, such as the weather, the value of the Australian Dollar, and the supply and demand of commodities, can impact the value. 

That is the reason to always trade within your risk-taking ability.

Which Professional Organisations Offer Commodity Trading Services In Australia?

SGS

It is the leading inspection, testing, verification, and certification company. With over 2,600 offices and world-class laboratories, the company operates in around 150 countries worldwide.

SGS has a team of risk management experts to assist traders with commodity trading operations throughout the supply chain, including:

• Planning of transportation 

• Tracking

• Preparing Documentation (export/import permits)

• Quality evaluation and testing

• Volume measurement

• Deception

• Supply chain

Regardless of the commodity you want to trade, they will assess the risks professionally and provide the information for strategic decisions.

RMG Global Trading

It is a leading commodity trading company specialising in sourcing and distributing frozen and dry food commodities.

Their team of intelligent, driven, and diligent professionals use innovative trading software, real-time data, and artificial intelligence to provide streamlined operations, seamless transactions, and superior outcomes for clients throughout the food chain.

Where Can You Trade Commodities As A Beginner?

eToro is a recognised and trusted commodities trading platform. It is great for beginner traders as it allows users to start with a demo account before trading with real money. You can create an eToro trading account HERE.

eToro AUS Capital Ltd ACN 612 791 803 AFSL 491139. OTC Derivatives are speculative and leveraged. Not suitable for all investors. Capital at risk. See PDS and TMD

Traders can access their services on a Mac, PC, or mobile device. With an easy registration process, you can start trading commodity CFDs in a few minutes.

eToro offers an opportunity to trade a broad range of popular commodities in any place during market hours.

Here are some of the key features and benefits of using this trading platform:

• Globally recognised 

• Fully regulated and licensed

• Operates in multiple countries 

• Offer a wide range of commodities 

• Multilingual 24/5 customer support to clients 

• Competitive spreads 

• Beneficial trading conditions

How To Become A Weather Trader?

Unpredictable weather conditions such as heat, rainfall, snowfall, and wind influence our daily lives and big businesses, including commodities.

To mitigate risks posed by bad weather, becoming a "weather trader" has become very popular among youths.

Insurance companies, government organisations, energy companies, agriculture, travel companies, and hedge funds are the key players in weather derivatives. 

It helps them hedge the overall risk for commodity production and utilisation. A combination of commodity and weather derivatives is ideal for risk elimination.

Weather traders should understand how to use weather derivatives to eliminate risks of varying weather conditions that change the demand and supply of commodities. 

Based on their research and understanding, whether traders take suitable positions to mitigate weather-related risks perceived by commodity businesses.

14. Conclusion

Investors have recognised the significance of incorporating commodities into their portfolios throughout history.

By doing so, they aim to achieve diversification, safeguard against economic downturns, and optimise their profits. Given its numerous advantages, commodity trading continues to be in high demand.

To thrive in this profession, one must understand the commodities market, including the various types of commodities, trading strategies, and the associated risks.

Additionally, continuously sharpening your skills and staying updated with market trends is essential for success in this field.

If you still need a trading account to buy commodities, consider eToro, used by many investors in Australia and worldwide. You can create an eToro trading account HERE.

eToro AUS Capital Ltd ACN 612 791 803 AFSL 491139. OTC Derivatives are speculative and leveraged. Not suitable for all investors. Capital at risk. See PDS and TMD

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