Learning day trading: which path is right?

Learning day trading: which path is right?

by | Aug 19, 2026 | Day Trading

Futures or Options in Day Trading: What Fits Your Daily Life?

Futures or Options in Day Trading: What Fits Your Daily Life?

by | Feb 16, 2025 | Options Trading, Video Blog

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A taut wooden bow with a horizontally placed arrow sits beside an open coral-colored umbrella.
VideoWH SelfInvest webinar

Futures or Options in Day Trading:
What Fits Your Daily Life?

Oliver Sparing
Oliver Sparing
Founder & Head of Trading · TradeNeon
Webinar in German, published February 16, 2025 · 63 min video

Anyone who thinks of day trading usually thinks of futures: buy, set a stop, speculate on the direction of price. Alongside it, selling options is a second possibility, one that behaves differently in reward-to-risk ratio, hit rate and time commitment. This article compares both instruments, follows a recorded trade and names the downside clearly.

The same entry, two instruments: one needs a precise target, the other forgives more.Image: TradeNeon

Contents
The videoTwo ideas of tradingThe option as an insurance businessTrading discretionarily or statisticallyEveryday day trading: time, hit rate and reward-to-risk ratioChart example: stop in the future or sold put optionA recorded bear call spread in the S&P 500Zero-DTE options in conversationThe downside: risk and protectionWhat you can take away from the webinarAbout the webinar
Key points first

In a future, you give the trade a stop and aim for a good reward-to-risk ratio; with a sold option, you collect a premium, speculate that price will not reach a certain level or will not run far against you, and benefit from time decay. That can lead to a higher hit rate and forgives more mistakes in the entry; whether it works out depends on strike, time to expiration and risk management, and the premium is compensation for an obligation and a risk, not proof of a profitable system. The profit is capped at the premium, the option writer's risk of loss tends to be larger than that profit and, on a sold call without protection, theoretically unlimited, and the instrument demands understanding and protection.

01

The video

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Chapters in the video 27

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Video: WH SelfInvest DeutschlandMore videos from TradeNeon on our YouTube channel.

02

Two ideas of trading

How futures and options differ for the day trader and what suits whom comes down to everyday life. Most people picture trading like this: buy cheap and sell higher, or the other way round, sell short high and buy back lower. That is the conventional idea of speculating directionally on the price of a market. Alongside it, the option is an instrument that opens up possibilities that are particularly interesting for retail traders and can make everyday life more manageable.

A warning comes with it. “The option is a complex trading instrument, and I am a big fan of only trading what you have truly understood, not just roughly understood, but really knowing what you are doing,” says Oliver Sparing. You do not have to go deep into the subject, but you should know what a put is, what a call is, which rights the buyer and which obligations the seller has, and how the relation to the current price (at the money, in the money, out of the money) plays out. All of this can be learned, but it is more complex than buying a stock.

03

The option as an insurance business

The basic idea can be compared to health insurance. Every month, you pay the insurer a premium that you do not get back, and in return you acquire a right that you can use in an emergency but do not have to. The insurer has to calculate its premiums so that it works at a profit with high probability. If they were too low, it would soon be bankrupt.

Options have a similar setup. The buyer acquires a right, and the option writerThe seller of an option. They take on the obligation if the buyer exercises their right., meaning the seller, takes on an obligation in return. What that looks like depends on the type of option. With a call optionThe right to buy the underlying at an agreed price within a set term. With index options such as those on the SPX, there is a cash settlement claim instead. on a stock or a future, the buyer has the right to buy the underlying at an agreed price; with a put optionThe right to sell the underlying at an agreed price within a set term. With index options such as those on the SPX, there is a cash settlement claim instead., the right to sell it at an agreed price; the option writer then has to deliver or take delivery. With index options such as those on the SPX, nothing is delivered; they settle in cash instead: the buyer receives the amount by which the index is above (call) or below (put) the agreed price at expiration. The buyer pays the premiumThe price of the option. The buyer pays it when buying and can sell the option again before expiration, receiving its current price. The option writer is credited with it on the sale and keeps all of it if the option expires worthless or is not bought back at a higher price. when buying. Before expiration, the buyer can sell the option again and then receives its current price. If the price rises very far on a call, the buyer can make a large profit, and in the worst case the option writer faces an incalculable risk. Their maximum profit, by contrast, is capped at the premium.

From this, a statistical edgeOliver's term for the assumption that option premiums compensate the seller for their risk on average. It is not a built-in profit: the result depends on strike, time to expiration and risk management. for the seller can be derived: as with the insurer, the premium has to be set so that the seller is compensated for the obligation and the risk, otherwise nobody would sell options. That is an argument, not proof: the premium is payment for an obligation and a risk, not proof of a profitable system. Whether a seller earns money over time depends, among other things, on strike, time to expiration, position size and risk management. How the role of the option writer and protection work in detail is explained at more length in the ATAS webinar that we describe in this article: Zero-DTE Options or Futures in Day Trading. Here, the focus is on the comparison with the future and on the trader's everyday life.

04

Trading discretionarily or statistically

In directional trading as well as in options trading, you can distinguish two ways of trading. Discretionary tradingTrading based on your own assessment of the market, for example from the order book. means you look at what happens in the order book, interpret the market, form an opinion and enter a trade on that basis. Statistical tradingTrading by fixed, clear rules: when certain conditions occur, you trade in a predefined way. is based on fixed, clear rules: if A, B and C happen, I do D.

Ten to twenty years ago, statistical trading was still the standard, in the retail space too. Strategies such as the crossing of two moving averages worked back then, even intraday. Such plain rules alone hardly get you anywhere today: anyone who wants to trade statistically has to think much more intricately. There are still strategies that work purely rule-based, but they are no longer as quick to find as they used to be.

In options trading, the classic strategies are statistical: they rely on the premium compensating the seller for their risk on average. The rules might say, for example, to sell a put option at a fixed strike every day at the opening of the US market. There are losers along the way; whether the edge shows over the long run depends on strike, time to expiration, position size and risk management. Anyone who has already looked into the subject comes across this kind of options trading. Less well known is that you can also use options discretionarily: you take your entries from the order book, for example from the heatmapThe heatmap shows the order book over time: where limit orders sat and how large they were., and implement them with an option instead of the future. That brings the occasional small disadvantage but a number of advantages.

05

Everyday day trading: time, hit rate and reward-to-risk ratio

Many traders have a job and a family and cannot sit at the market six hours every day. Day trading is still supposed to add value to your life, first and foremost financially, but also as an activity that is fun. Classic discretionary order book trading is a path with a long learning phase: it is rarely learned in a few months and goes hand in hand with a lot of experience. On top of that, everyone has to find the trading style that suits them. Many roads lead to Rome; there is no single right strategy.

Then comes the question many people wrestle with: reward-to-risk ratioThe ratio of the possible profit to the possible loss of a trade. or hit rate? On the internet, you often read that the reward-to-risk ratio is everything. That is not entirely wrong, because it is an important factor. But it is only one of four factors of the risk quadrantThe four factors reward-to-risk ratio, hit rate, risk per trade and trading frequency, which influence each other.: reward-to-risk ratio, hit rate, risk per trade and trading frequency. They influence each other, above all hit rate and reward-to-risk ratio. Anyone who chooses a strategy with a higher hit rate usually has to accept a lower reward-to-risk ratio in the end, and the other way round.

How far this can go shows an experience from London: Oliver Sparing met traders on a prop trading floor there who work with a very low hit rate and a very high reward-to-risk ratio. “That is never something I could or would teach my clients. They would all go crazy, and that includes me,” he says. Anyone who makes only one trade a day and rarely wins can trade through an entire month without a single winning trade. At some point, frustration sets in, motivation suffers, and you quit. The hit rate is therefore by no means unimportant. A strategy that settles at a healthy middle ground between reward-to-risk ratio and hit rate makes sense.

Even with such a strategy, it can happen that you sit at the computer five days a week, wait in your trading window for the one good setup and still end every day with a red number. That is not unusual, and an experienced trader can handle it. What matters is what is left at the end of the month and, even more so, at the end of the year. There is a different approach that is meant to combine both worlds and can be more pleasant in everyday life, for your wallet as well as for your psyche: entering trades not directionally in the future but by selling options. The hit rate is often clearly higher this way.

06

Chart example: stop in the future or sold put option

On the 5-minute chart of the ES, the E-mini future on the S&P 500, the basic idea can be shown, deliberately without it being a real trading opportunity. The market moves into a zone with institutional trading interest, forms a reversal candle and rises again. You enter long. The stop sensibly belongs below the last low, the first target at the price where the market has bounced several times already. That gives you a clearly defined risk and a reward-to-risk ratio of about 1.5.

Now what every trader knows happens: the market briefly dips below the low, takes your stop and then rises after all. With every trade, it pays to ask how far it may run against you until you have to admit you were wrong. If the market builds volume below the low and breaks out, the idea is refuted, and you leave the trade. If it was only a short excursion, the question remains whether that was really the moment you were wrong. From a risk management perspective in directional trading, the stop belongs there anyway, and it has to be as small as possible to achieve a good reward-to-risk ratio.

With the option, the approach looks different. Instead of buying the future, you sell a put option on the future further down. You are the option writer and collect a premium that is credited to you when you sell. In return, you grant the buyer the right to sell you the future at this price, the strikeThe price the right of the option refers to., until expiration. In the imagined scenario, the market is at 6,052 points and the strike is at 6,040. As long as the market stays above the strike and the put is worthless at expiration, the buyer has no reason to use the right: they can sell in the market at a higher price. The option expires, and you keep the entire premium. That also applies if your assessment was wrong and the market did not rise.

5-minute chart of the S&P 500 E-mini future (ES) with red hand drawings: an outlined zone, the entry circled at a reversal candle, a short line below the last low as the stop, further down a line labeled “Put Stillhalter” (short put) as the strike, a vertical line for the option's expiration and a zigzag line for an assumed sideways move above the strike.
Oliver's hand-drawn scheme on the 5-minute chart of the ES (S&P 500 future, March 2025 contract): entry and stop of the futures trade, below it the strike of the sold put and the expiration of the option. In the imagined scenario, the market is at 6,052 points and the strike at 6,040. A scheme, not a real trading opportunity. From minute 28:44. Image: WH SelfInvest Deutschland

So you are not speculating that price rises from your entry but that it does not fall to the strike by expiration. The market would have to run very far to get you into trouble at all. That is a completely different idea from catching the ideal moment to make profits as quickly as possible. The other side of the trade does not necessarily have to be a loser: there can be winners on both sides of a trade, because you do not know the other party's intention.

The big disadvantage: the profit is capped at the premium. If the market explodes in your direction, a directional trade would have brought clearly more, and that annoys an inexperienced trader. Set against this: anyone who knows what they are doing, how and where they sell options and with what time to expiration, can see a clearly higher hit rate and trading that is more pleasant in everyday life. “You are capped at the premium, but you get it back with the hit rates and have a much more pleasant, relaxed time in everyday life,” says Oliver Sparing. The entry then often forgives more: the market may run slightly against you, and you still leave the trade as a winner. A directional trade, by contrast, must not reach the stop level and ideally has to run in your direction right away. Both the hit rate and that forgiveness, however, depend on strike, time to expiration and risk management. The price for it is stated above: a profit that never exceeds the premium, and a loss that very well can.

The following table summarizes the comparison. It refers to sold options, not to options in general:

CriterionDirectional futures tradeShort put or call option
Market expectationPrice has to run in your direction.Price should not reach the strike by expiration, so it should not run far against you.
Cap on profitThe instrument itself does not cap the profit.The profit is at most the premium collected.
Loss profileThe loss is limited by the stop as long as it is executed; price gaps are possible.The loss tends to be larger than the premium, even with a spread. On an uncovered call it is theoretically unlimited; on an uncovered put it can run until price falls to zero.
Effect of timeTime alone brings neither profit nor loss.Time decay works for the seller, but price and implied volatility also affect the option price.
Role of the stopThe stop sits tight below or above the entry and is the core of the reward-to-risk ratio.The position gives more room but does not replace an exit plan: stops, spreads and closing manually are part of it.
07

A recorded bear call spread in the S&P 500

The example is one of Oliver Sparing's own trades from the days before the webinar, deliberately one that did not work out as hoped. On the screen, you see the 5-minute chart, the footprint chart, the heatmap and an excerpt of the trading platform with the position. The trade ran on the SPX, the S&P 500 index, whose options settle in cash: no future is delivered. The chart analysis comes from the ES future; at entry, the ES stood at about 6,080 points.

Shortly after the opening of the US session, the market, after a move down, is in a zone where, by the analysis behind the trade, market makers in the options markets have to adjust open hedges. To do so, they mainly sell the underlying and tend to push the market down. That is why this zone is where short entries are sought.

The entry is a bear call spread. According to the platform line (SPX Jan29 6105/6140), a call with a 6,105 strike was sold and, for protection, a call at 6,140 was bought; expiration is January 29, 2025. The buyer of the sold call is entitled to the amount by which the SPX is above 6,105 at expiration, settled in cash. If the index ends below that, the right expires worthless. The premium collected was $141.80 after fees, which is also the maximum profit. By calculation, the spread's maximum risk is 35 points × $100 − $141.80 = $3,358.20, or a good 23 times the premium. That shows that the option writer's risk of loss is larger than the possible profit even with a spread. The software continuously shows how far the trade is in profit or loss, relative to the premium collected.

In fast forward, the example plays out like this. First, the market briefly moves in the desired direction, then against the position. With a directional trade and a stop above the last high, the trade would have been stopped out, although the market was still in the downtrend, in the zone and below the VWAP, and the idea was unchanged. With the spread, the trade is only slightly in the red. That leaves time to wait and judge how far the market may run at most before the trade idea is no longer intact.

Trading platform with the position line “SPX Jan29 6105/6140 Bear…” and an open result of minus 15 dollars (minus 10.3 percent of the premium), below it the 5-minute chart, footprint and heatmap of the ES at about 6,080 points, chart dated January 29, 2025.
The position is slightly in the red: −$15, or −10.3% of the premium. Below it, the 5-minute chart, footprint and heatmap of the ES, which stands at about 6,080 points (chart dated 01/29/2025). A single historical example, not a typical result. From minute 40:10. Image: WH SelfInvest Deutschland

The market then runs to the edge of the zone and to the VWAP, the resistance holds, and the market rejects the area and falls back. Had it broken above and stabilized, the trade would have been closed at that point to limit the risk. The loss would then probably still have been below 60 to 70% of the premium. Instead, the market falls again, and the position is in profit with the ES around 6,080 points, at the same price level where it had been in the red before.

The same position on the trading platform with an open result of plus 12 dollars (plus 8.3 percent of the premium); the ES is again at about 6,080 points.
The same position at about the same ES price, now +$12 (+8.3% of the premium) in profit. A single historical example, not a typical result. From minute 44:40. Image: WH SelfInvest Deutschland

One reason is time valueThe part of the option price that shrinks as expiration approaches. That works for the seller, but price movement and implied volatility also affect the price and can cancel the effect.: it shrinks over time, and that works for the seller. For this trade, the chance of still becoming a loser fell with every minute. That holds for this one example, not as a law: price movement and implied volatility also affect the option price and can cancel the time value effect. If price did not move at all, a directional trade would neither win nor lose, while the sold option would rise in value through time decay.

Later comes the breakout that had been awaited, but it turns out to be a false breakout. The market reacts at the level, and buyers return. The trade idea is no longer intact, and the position is closed: up 31% of the premium, $44, with the ES back around 6,080, the level of the entry. The trade ends in profit, although from a directional point of view the original idea did not work out most of the time, and it was never under great pressure. The value of the example lies not in the profit but in how a trade behaves that does not immediately do what you expected. Oliver Sparing sums it up: “It is more pleasant, it forgives more, it gives you more room, more time to think, to reflect and to look at what the market is showing you right now and how you want to react to it.” It remains a single historical example. Had the market kept pushing against the position, an exit would have been necessary, and the risk was, as calculated above, well above the premium.

08

Zero-DTE options in conversation

The time decay of the short position can be used to withstand smaller moves in the wrong direction. This has only been possible in this form for a short time: since 2022, there have been zero-DTE optionsOptions with zero days to expiration: they expire on the day of trading. that expire daily. Oliver Sparing trades classic statistical zero-DTE options with fixed rules in parallel and now also does a large part of his trades with zero-DTE options. That came about more by chance: he ran his conventional futures trades statistically alongside zero-DTE options for comparison and at some point traded both in parallel. He stayed with zero-DTE options because it is so pleasant for him, especially for people with a job, even though he made more money with futures.

One difference from the future: with the option, the profit is capped from the start, whereas with the future it can theoretically rise without limit. In return, the future has the stop-outs at important points such as round numbers on the chart, for example when the market first breaks out, then comes back and takes the stop and afterwards runs the typical move. With the option, such a swing is easier to withstand, as long as the position does not run too far into the red. Because you continuously see how the position develops, you can also pull the plug at any time and be content with a smaller profit instead of waiting for the entire premium.

09

The downside: risk and protection

This has to be learned, and it takes experience, especially when it goes against you. With option writing, you tend to always have a larger risk of loss than the profit you can potentially collect, even if you protect yourself with a spread. You therefore have to stay objective. If the market moves into an area where the trade no longer makes sense, you take it out manually and think: next time it will work better.

The classic mistake is to hope that the market will still come your way. Then a trade in which you collected a premium can turn into a loss that is a multiple of the premium and that first has to be earned back. That is the downside of the whole thing: you have to stay honest, act on what the market shows you and protect yourself sensibly with stops and spreads. That is part of options trading.

With zero-DTE options, time decay works even faster, but that is put into perspective by the fact that you still have to be right about the direction. Anyone who has sold a call and counts on it expiring worthless can be wrong: if the market rises, it can rise without limit. That belongs on your radar to pull the plug in time. Part of the art lies there.

10

What you can take away from the webinar

  • Futures and options start at different points. The future lives on its stop and reward-to-risk ratio, the sold option on the premium, time value and a tendency toward a higher hit rate. The premium pays for an obligation and a risk; it is not proof of a profitable system.
  • The sold option often leaves more room in the entry. A trade can run against you for a while and still end in profit, because time value shrinks. How much room you get depends on strike, time to expiration and risk management, and price movement and volatility also affect the price. In return, the profit is capped at the premium.
  • The option writer's risk of loss is larger than their possible profit. That stays true even with a spread: in the recorded example, the maximum risk was a good 23 times the premium by calculation. A trade in which you collected a premium can end in the red with a multiple of it if you do not exit in time. Stops and spreads are part of it.
  • Only trade what you have understood. The option is a complex instrument. Find the trading style that fits you, your time and your capital.

“You always have to stay objective and say: when the market moves into an area where I say, okay, my trade no longer makes sense here, then I really have to take it out manually, too.”

Oliver Sparing in the WH SelfInvest webinar (translated from German)
11

About the webinar

The webinar ran as part of the WH SelfInvest webinar series and is published on the YouTube channel of WH SelfInvest Deutschland. It was hosted by Stefan Fröhlich of WH SelfInvest. WH SelfInvest is a broker. The webinar is held in German; on YouTube, you can switch on machine-translated subtitles. Oliver is a regular guest there; you can find all appearances on our guest appearances page.

Note: the webinar is for educational purposes only and is not investment advice. Trading futures and options involves high risks, and everyone trades at their own risk. The video is a recording from 2025. What it announces as upcoming may look different today; brand, company and product names as well as references to training programmes and ways to get in touch reflect the status at that time.

Day trading programme
Which trading approach fits your daily life?
Whether you trade futures or options, entry, stop and risk have to fit your time and your capital. In our day trading programme, you learn to align them. The programme is currently offered in German.
Day trading programme (German)
Frequently asked questions
What is the difference between futures and options in day trading?

With a future, you speculate directionally on the price, protect yourself with a stop and aim for a good reward-to-risk ratio. With a sold option, you collect a premium and speculate that price will not reach a certain level anymore. That can lead to a higher hit rate and forgives more mistakes in the entry; whether it works out depends on strike, time to expiration and risk management. The profit stays capped at the premium.

What is the downside of selling options?

The profit is capped at the premium from the start, whereas the option writer's risk of loss tends to be larger than that profit: theoretically unlimited on an uncovered call, and down to a price of zero on an uncovered put. Even with a spread, the risk stays larger than the possible profit; in the recorded example, it was by calculation a good 23 times the premium. On top of that, the option is a complex instrument that you have to have understood.

Why can an options trade end in profit even though the market runs against the position for a while?

Over time, the time value of the sold option shrinks, and that works for the seller. If price moves sideways, a directional trade would neither win nor lose, while the sold option gains from time value. Price movement and implied volatility also affect the option price, though, and can cancel the effect. In the recorded bear call spread on the SPX, the position was slightly in the red for a while (−$15), where a tight stop in the future would already have been hit, and later moved into profit. That is a single historical example, not a typical result.

How do you protect sold options?

Stops and spreads are part of options trading. It also helps to stay objective and to close a trade manually when the trade idea no longer holds, instead of hoping that the market will still turn.

FuturesOptions TradingWH SelfInvest
Oliver Sparing
Oliver Sparing
Founder & Head of Trading · TradeNeon
Oliver Sparing has been actively trading the financial markets since 2011. His professional roots lie in precious metals trading in Hamburg; in 2017 he learned at a London trading floor. At TradeNeon he leads the day trading and swing trading programmes and is responsible for the trading methodology, with a focus on order flow, market structure and fundamental market data. Level of Interest, Futures Insights and Lab of Trades grew out of this work. Platforms such as ATAS, Bookmap and WH SelfInvest regularly invite him as a guest. All guest appearances
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Learn day trading: six steps for beginners

Learn day trading: six steps for beginners

by | Feb 9, 2022 | Day Trading, Trading

← All articles
An anonymous person climbs broad stone steps towards a trading desk.
Trading

Learn day trading: six steps for beginners

TradeNeon Academy
Originally published · 17 min read

Learning day trading starts with knowledge, a suitable learning path and controlled practice. These six steps help you assess training, brokers, software and capital models.

Concept illustrationImage: TradeNeon

Why learn day trading?

Before learning day tradingIn day trading, positions are opened and closed again within a single trading day., clarify which trading approach you actually want to pursue. Trading covers different holding periods: position traders may hold a position for several months, while swing traders may hold it for days or weeks. How often you analyse and monitor a position depends on the market, approach and risk. Longer-term trading also requires learning, preparation and regular review; a longer holding period promises neither little work nor a particular return.

Day trading is short-term trading with opportunities and a risk of losses.

In day trading, positions are opened and closed within a single trading day. In the even shorter-term approach known as scalping, individual positions may last only briefly. Active market observation, preparation and monitoring form part of the process; screen time depends on the trading approach. Day trading can be pursued professionally or alongside another activity. Knowledge and practice are necessary, but do not secure an income. Experienced traders can also incur losses.

Allow time for learning and establish a loss budget you can afford. Day trading is not a reliable route to making money quickly. An independent trading approach may offer flexibility, but remains subject to market hours, broker terms, technical infrastructure and your financial circumstances. Effort alone guarantees neither a career change nor consistently profitable trading. The following six steps help organise the decisions and requirements involved.

Build your knowledge

As in other fields, you need to understand what you are doing and why. If you have not yet grasped the basics of trading or how an exchange works, build that knowledge first. Books on financial-market fundamentals can provide a starting point. You should eventually be able to answer the following questions confidently. Each short answer introduces a topic that you should investigate in greater depth.

1. Which asset classes and trading instruments are there?

Asset classes include stocks and bonds. An ETF is a fund structure through which you can invest in assets such as these. Depending on their approach, traders use securities and derivatives such as futuresA future is a standardized forward contract that obligates the trading partners to a transaction in the future. and options. A derivative derives its value from an underlying asset or reference measure. Short-term commodity trading often uses futures; depending on the contract, settlement can be financial or involve physical delivery. For example, the WTI crude-oil future CL provides for delivery in Cushing. Check the contract specification, expiry, delivery rules and any earlier closing deadlines imposed by your broker.

2. Which instruments fit your approach?

Professional market participants use different instruments. Futures and exchange-traded options are standardised derivatives: contract size, expiry and settlement are defined in their specifications. These features make it easier to describe trading and risk. They do not automatically make a product suitable for beginners. First understand its pricing, capital requirements, potential losses and purpose within your trading approach.

CFDs and many foreign-exchange transactions are traded over the counter. Certificates and warrants, however, can also trade on an exchange. The venue alone does not fully describe a product’s structure: a certificate remains a claim against its issuer even when exchange traded. With over-the-counter products, examine the contractual counterparty, pricing and potential conflicts of interest particularly carefully. A blanket allegation that all brokers manipulate prices at will is not an accurate explanation.

Compare the trading venue, pricing, costs, contract size, counterparty, regulation and loss risks for the specific product. Exchange standardisation is a verifiable feature; it neither guarantees profits nor justifies ignoring the product’s risks. What matters is understanding the instrument and its terms.

An exchange as an organised marketplace: a person with an exchange building as their head, with blue and pink order cards.
Concept illustration: organised trading. Image: TradeNeon.

3. What is an exchange?

An exchange is an organised trading venue where buy and sell orders are matched under defined rules. The New York Stock Exchange is an example of a securities exchange; CME Group venues trade products including futures and options. Standardised procedures and market surveillance make the process more transparent. They guarantee neither an economically fair value at every moment nor your desired execution price. Liquidity shortages and substantial price losses can also occur on an exchange.

4. Who participates in the market?

Different interests meet on an exchange. Speculators take positions in expectation of a price movement. Commercial hedgers use hedgingHedging is the purchase (or sale) of trading instruments to protect an existing position. to limit risks associated with existing or planned business: a coffee producer, for example, may hedge crop-price risk with futures. Arbitrageurs try to exploit price differences between identical or economically comparable positions. Trading costs, currencies and settlement terms must be taken into account.

A calendar spread combines a long and a short position in the same futures product with different expiries, such as a May and a September contract. Its result depends on how the difference between their prices develops. Such a spread can also incur losses. An apparent price difference between two exchanges does not offer certain arbitrage either: the positions must be economically comparable, and costs and execution risks cannot be ignored.

5. How do money management and leverage work?

Risk and money management belong in the planning of every trading approach. Relevant factors include exposure, contract size, the number of contracts, price movements and account capital. The larger your position relative to your capital, the more strongly gains and losses affect the account. Futures margin is collateral; it is not the maximum possible trading loss. Leverage can substantially amplify the effect of small price movements.

Before entering a trade, decide which position size and loss budget fit your capital and personal circumstances. Plan your exit under realistic execution conditions. Stop orders guarantee neither an execution price nor an exact loss limit; slippage and a lack of liquidity may change the outcome. An acceptable risk per trade depends on the product, approach and loss budget. A single percentage is not a universal safety rule.

6. How is a price formed?

Looking at the order book helps explain price formation. It contains buying and selling offers. A limit order that cannot yet execute may remain in the book, providing liquidity. An immediately executable limit order may instead trade against existing offers and take liquidity. Whether an order provides or takes liquidity depends on its price and the current situation; it is not a permanent characteristic of a person.

Market orders also access available offers; the final execution price is not guaranteed in advance. The last traded price changes when a new transaction takes place. The best bid and ask offers can also change when orders are entered, amended or cancelled without a new trade occurring. Therefore distinguish the last trade, current quotes and the midpoint between bid and ask.

Choose a structured learning path

If you want to earn money from day trading or swing trading, approach learning with the commitment of vocational training. Information is widely available online. The challenge is assessing its quality, recognising how the material fits together and developing a structured trading approach. Basic knowledge gained through self-study can provide a starting point. A thorough training programme organises the learning path, combines theory with practical exercises and provides feedback on your implementation.

Examine offers critically and compare teaching structure, support, costs and the treatment of risk. Large profit promises, isolated success screenshots and strong self-promotion do not replace understandable content. This article does not rely on a substantiated count of reputable or disreputable providers. The following questions help you assess an offer more closely.

These selection questions are not a claim that you must choose us. We welcome your interest in our training, while recognising that other providers also offer relevant education. Compare the offer on its own merits and examine the following points before choosing a trading course.

Ten points to consider when choosing the right trading training programme

  1. 1. How visible is the coach?

    Can you find articles, publications or videos by the coach?

  2. 2. How does the person present themselves?

    Do they boast about wealth and success, or explain trading in a factual and professional manner? Use your judgement.

  3. 3. Do you feel comfortable with the person?

  4. 4. How much experience does the person have in exchange trading?

  5. 5. Can the coach demonstrate subject knowledge?

    Do you find their knowledge of exchange trading convincing?

  6. 6. How old is the coach?

    Do they have relevant life experience? Do they have experience in teaching?

  7. 7. How accessible is the training provider?

    Can you contact the coach or school, and are your questions answered promptly and competently?

  8. 8. How transparent is the training?

    Are results presented with clear context: real or simulated trading, the period covered, costs and interim losses? Individual screenshots do not prove lasting profitability. Past results do not promise that you will achieve the same outcome.

  9. 9. What does ongoing support involve?

    What support do you receive beyond a video course? Is there feedback on your implementation, a clear contact person and an understandable process over the agreed period? Check the services promised in the contract. Support is a feature of the format, not a promise that you will become a successful trader.

  10. 10. How openly are mistakes discussed?

    Losses and mistakes are part of exchange trading. Is it openly explained how they are analysed and what consequences follow for risk and execution? Extensive experience does not eliminate losses.

Use these questions as selection aids. Visibility, personal rapport and age do not replace checking subject knowledge, teaching structure, support, costs and the treatment of risk. An older or publicly known coach does not by that fact prove the quality of a course. What matters is whether you can understand the offer and its limitations.

Open a brokerage account

You can access securities and derivatives trading through a bank or broker offering the relevant services. First check whether your products and venues are available and which legal entity holds your account. A local bank is not automatically too expensive or unsuitable for every approach. For frequent trading, compare its terms against your actual order sizes, data requirements and processes.

Compare total costs: commissions, exchange and clearing charges, market data, platform fees and, where applicable, currency conversion. Some charges depend on trading activity; others are fixed. Also examine execution policies and potential conflicts of interest. A broker’s educational offering is not automatically worthless; its interests and any selling purpose should be transparent.

Choosing a broker: an anonymous person examines unlabelled documents at a dark desk.
Concept illustration: reviewing broker terms. Image: TradeNeon.

Check the contractual entity, authorisation and supervision, access to your products, costs, deposits and withdrawals, and support. Test whether data and order functions suit your approach and who handles technical problems. A brand name or a long product list is not enough to make a choice. A focus on CFDs or foreign exchange alone does not establish an intention to harm customers.

The broker, account-holding or executing entity, data feed and trading platform fulfil different roles. Interactive Brokers provides brokerage; LYNX and CapTrader describe partner or introducing relationships with IB. Dorman and AMP describe futures execution or clearing. According to its documentation, TradeStation combines platform and brokerage services. Trading Technologies is a platform provider with broker and clearing connections. These examples are neither a verified ranking nor an individual recommendation. Check the entity responsible for your country of residence and its current terms. Frequent trading may substantially increase total costs; calculate them for your approach.

Set up suitable trading software

Trading software offers different tools for analysis, testing and order execution. TradingView provides charts and volume-footprint displays as well as DOM and trading where suitable broker connections and market-depth data are available. Whether these functions support your approach depends on data quality, real-time permissions, calculation methods and order functions. TradingView describes intrabar-based volume classification for its footprint; this is not automatically identical to exchange-native bid/ask aggressor volume. Check historical granularity and possible recalculation.

TradeStation and Trade Navigator are other examples of platforms with analysis, testing and order functions. Check the manufacturer’s documentation for current functions and connections. This does not establish a general claim about their predominant users. For a semi-automated approach, also check the specific order and testing functions required.

Other platform examples include Trading Technologies, Jigsaw, NinjaTrader, Volfix, ATAS and Sierra Chart. Trading Technologies describes broker and clearing connections; this does not imply that every user trades with a TT-owned broker. Jigsaw offers order-book tools, while NinjaTrader and Volfix offer different analysis and trading functions. Compare them against your requirements, data connections, usability, stability in your own testing and total costs. An older personal experience proves neither current technical quality nor a general position as the best platform.

ATAS

ATAS offers order-flow and volume analysis, among other functions. Check which tools, data feeds and broker connections your package includes. Testing should show whether you are comfortable with the interface and workflow and whether the displays suit your approach. Compare recurring package, data and any order costs. Annual quality improvements or a general leading position cannot be established from the manufacturer’s description alone.

Sierra Chart

Sierra Chart offers different packages and data and trading connections. The functions and ongoing costs you need depend on the market, data permissions and your approach. You can assess usability and support in your own trial before deciding. Compare the required package and data permissions for your markets rather than relying on an overall ranking.

Take time for structured practice

Practise with clear rules and document what you implement. This includes preparation, entry, position size, exit, costs and reviewing deviations. The duration of this learning phase varies individually; a fixed number of months does not predict success. Observe markets deliberately and test an understandable approach before continually combining new methods. Professional feedback can help identify gaps in knowledge and execution errors.

Start in a simulation where you do not commit real trading capital. Demo, data and software access may still involve costs. Simulated results do not automatically correspond to real execution: fees, slippage, liquidity and the pressure of actual losses may differ. An early move to real-money trading is not compulsory. If you later choose to make that move, you need a loss budget you can afford, an appropriate contract and position size, and a clear understanding of broker terms. Even small positions can cause losses; profits in a demo account do not establish that real trading is financially harmless.

Understand own-capital and prop or evaluation models

Alongside trading in your own real-money account, different prop and evaluation offers exist. In some consumer offers, you initially pay a challenge fee and must meet defined targets and loss limits. Even after passing an evaluation, the displayed account may continue using fictitious funds. Any reward depends on the contract, results and payout conditions. The displayed account balance is then not your own freely available capital. Examine the actual model rather than assuming that the term funded account means a real brokerage account.

80 percent is not a universal payout ratio. For the FTMO evaluation products examined here, the provider states 90 percent for 1-Step and initially 80 percent for 2-Step, potentially rising to 90 percent under specified conditions. Challenge-fee reimbursement also differs: according to the provider, the 1-Step fee is not reimbursed, while the stated first-reward conditions apply to 2-Step. These figures are an example as of 6 October 2026, not a statement about every provider or FTMO product. Compare costs, rule and loss limits, payout conditions and provider and contractual risks. Tax treatment cannot be determined from the words own capital or third-party capital alone.

Conclusion

Learning day trading in six steps

These six steps organise your learning path: build knowledge, choose a learning format, assess brokers and software, practise under controlled conditions and understand the capital model. They guarantee neither a first profit nor consistently profitable day trading. What matters is understanding products, execution, costs and loss risks, and being able to evaluate your implementation. Take time for this assessment and decide, based on your circumstances, whether and to what extent you want to trade at all.

Frequently asked questions

Can I learn day trading through self-study?

You can build basic knowledge through self-study. For a structured start in day trading, a thorough training programme is useful. There is plenty of information online; the challenge is selecting relevant material, understanding how it fits together and applying it in a coherent trading approach. If you want to earn money from day trading or swing trading, approach learning with the commitment of vocational training: subject knowledge, practical exercises and clear risk rules. Our day trading training provides an organised learning path with live support.

Explore our day trading training (in German)

Do I need to start trading with real money early?

No. An early move to real-money trading is not compulsory. First practise in simulation with clear rules and document your implementation. Simulated results do not establish real execution quality or a financially harmless starting point. Demo, data and software access can also involve costs.

Does futures margin limit my maximum loss?

No. Margin is collateral. Risk depends on factors including exposure, contract size, number of contracts, price movements and capital. Stop orders guarantee neither the execution price nor an exact loss limit. Check the product and broker terms applicable to you.

How do I choose a broker and suitable software?

Check the contractual entity, products, venues, execution policies, total costs and support. The broker, platform and data feed fulfil different roles. Software must fit your tools, data permissions and order functions; a brand name alone does not establish suitability.

Can futures result in physical delivery?

Yes. Settlement depends on the contract. For example, the WTI crude-oil future CL provides for physical delivery. Check the specification, expiry, delivery rules and your broker’s earlier closing deadlines before holding a position into its settlement period.

Is a prop or evaluation account free and risk-free?

No. Depending on the model, challenge fees may apply and accounts may use fictitious funds even after an evaluation. Rewards and refunds depend on the contract and conditions; 80 percent is not a universal payout ratio. Check costs, rules, loss limits, payouts and provider and contractual risks.

Sources and context

Editorial sources checked 6 October 2026. Historical data and views are identified by their respective periods.

  1. CME: Physical delivery of WTI futures
  2. CME: Orders and the order book
  3. CME: Futures order types
  4. CME: Futures margin
  5. CME: Position sizing and risk management
  6. Deutsche Börse: Certificates and warrants
  7. TradingView: Volume Footprint Charts
  8. TradingView: Depth of Market
  9. CFTC: Hypothetical performance disclosuresLimitations of hypothetical performance; no blanket claim that this U.S. rule applies to TradeNeon.
  10. FINRA: Day-trading risk disclosureU.S. risk context; neither a German loss rate nor an adoption of U.S. account thresholds.
  11. FTMO: Rewards by modelProvider documentation; product conditions may change. Checked 6 October 2026.
  12. FTMO: Simulated account capitalProvider documentation; product conditions may change. Checked 6 October 2026.
  13. FTMO: Fees and reimbursementProvider documentation; product conditions may change. Checked 6 October 2026.
  14. FSMA: Consumer risks in prop and evaluation offersBelgian consumer warning; not a general prohibition in Germany.
  15. Trading Technologies: Platform and broker connectionsProduct or functional documentation; not an individual provider recommendation.
  16. CapTrader: Partner relationshipProduct or functional documentation; not an individual provider recommendation.
  17. LYNX: Fees and termsProduct or functional documentation; not an individual provider recommendation.
  18. Dorman Trading: Futures servicesProduct or functional documentation; not an individual provider recommendation.
  19. AMP: Futures servicesProduct or functional documentation; not an individual provider recommendation.
  20. TradeStation: Futures productsProduct or functional documentation; not an individual provider recommendation.
  21. Jigsaw: Platform functionsProduct or functional documentation; not an individual provider recommendation.
  22. NinjaTrader: Platform functionsProduct or functional documentation; not an individual provider recommendation.
  23. ATAS: Analysis toolsProduct or functional documentation; not an individual provider recommendation.
  24. Volfix: Platform functionsProduct or functional documentation; not an individual provider recommendation.
  25. Trade Navigator: Product documentationProduct or functional documentation; not an individual provider recommendation.
  26. Sierra Chart: Packages and data connectionsProduct or functional documentation; not an individual provider recommendation.
  27. CME: Trader’s Guide to FuturesProduct or functional documentation; not an individual provider recommendation.
  28. CME: Calendar spreadsProduct or functional documentation; not an individual provider recommendation.
  29. Interactive Brokers: Fee modelsProduct or functional documentation; not an individual provider recommendation.
Further reading

You may also be interested in

Learning day trading: which path is right?Read article →Position Sizing and Risk Management in TradingRead article →Money management: Understanding the risk quadrant (German)Read article →

Is it immoral to trade commodities on an exchange?

Is it immoral to trade commodities on an exchange?

by | Jul 15, 2021 | Trading

← All articles
A conceptual illustration of commodity markets and ethical decisions.
Trading

Is it immoral to trade commodities on an exchange?

TradeNeon Academy
Originally published · 18 min read

Is trading commodities immoral? This article examines price formation, food supply, speculation and hedging, distinguishing personal arguments from verifiable facts.

Concept illustrationImage: TradeNeon

The ethics of futures trading

This article is intended to ease some of your concerns about the topic or give you useful arguments for conversations with friends and family—if you choose to engage in that sometimes exhausting discussion at all.

A central criticism of futures trading

One central criticism of speculative futuresA future is a standardized forward contract that obligates the trading partners to a transaction in the future. trading is that the contracts being traded can become detached from the goods actually available. First, however, we need to distinguish between settlement methods: some futures provide for physical delivery, while others are cash-settled. If you do not want delivery, you must observe the exchange and broker deadlines and close or roll your position in time. Automatic liquidation by your broker is not a general guarantee. Profits and losses are settled through clearing. Your counterparty does not have to share either your time horizon or your purpose.

Contracts, delivery obligations and physical backing

The gold market helps illustrate this distinction. The number of derivatives alone does not tell us how much metal must be available for the particular settlement process. Futures, gold ETFs and gold ETCs differ in their legal structures and terms. Some products confer a delivery entitlement; others only provide exposure to price movements. Physical backing does not automatically make you the owner of specific bars. Whether and how a product is backed must be checked for that particular product. A general shortage cannot be inferred from the number of contracts.

The same applies to our money. Commercial banks create deposit money when they lend. There is no general rule allowing them to lend exactly ten times the money they already hold. Regulation, funding requirements and demand for credit constrain lending. Loans can finance economic activity; they do not automatically increase prosperity.

Bank deposits are claims against a bank, not stocks of cash. Large-scale withdrawals can cause liquidity problems; that does not mean deposits are merely imaginary.

Trust is part of the monetary system. Deposit money also has a legal basis and is recorded on balance sheets.

Criticism of futures trading concerns, among other things, possible price distortions and their consequences for people who can barely afford food. But which economic effects can be substantiated, and how should we assess them morally? We need to distinguish these two questions before drawing a conclusion.

The Pope and the exchange

Speaking to the FAO on 11 June 2015, Pope Francis criticised the possible effects of financial speculationSpeculation is buying or selling an asset because you expect its price to change. on food prices and poor people. The phrase “This economy kills” comes instead from Evangelii gaudium, published in 2013, paragraph 53. There it refers to an economy of exclusion and unequal incomes. The documents and their contexts must be kept separate. These statements invite an economic and moral discussion; they are not a blanket scientific judgment on every futures transaction.

Our current economic system is, of course, far from perfect, and there are many areas where it needs to improve in the future.

We should also remember the economic and social progress of recent decades. Health, living conditions and incomes have improved over the long term in many countries. These gains are real but unevenly distributed; they do not rule out setbacks.

For a perspective on these developments grounded in data, I recommend “Factfulness” by Hans Rosling, Ola Rosling and Anna Rosling Rönnlund. Published in 2018, the book encourages readers to test widely held assumptions against data. Its historical figures do not, however, replace current datasets.

Extreme poverty has fallen over several decades. According to the World Bank’s September 2026 update, around 824 million people, or 10.1% of the world’s population, lived below the international poverty line of USD 3.00 per person per day in 2024, expressed in 2021 purchasing power parity terms.

Trade and access to markets can support development. Their contribution also depends on institutions, infrastructure, education and the distribution of income. Progress at a global level does not directly reveal how much of it is attributable to the removal of trade barriers.

Original cover of Factfulness
Factfulness
Global income distribution
Global income distribution 2015Visual reconstruction of historical income distributions by Ola Rosling and Our World in Data. The horizontal axis shows daily income per person in international dollars at 2011 prices on a logarithmic scale. Four coloured areas represent world regions.EuropeAmericasAfricaAsia/PacificEuropeAmericasAfricaAsia/PacificEuropeAmericasAfricaAsia/Pacificpoverty line at that time0,21520100
International dollars per day ·2011 PPP · logarithmic
EuropeAmericasAfricaAsia/Pacific
Visual reconstruction of the historical estimate. Max Roser / Our World in Data, Data: Ola Rosling / Gapminder · CC BY.
Source and context

The original graphic reconstructs income distributions from national income, population and within-country inequality. Income is adjusted for purchasing power and inflation; non-market income is included. Curves were traced visually from that graphic. They represent 1800,1975 and 2015 and are not current measurements.

The same applies to futures markets: their economic function needs to be examined separately.

Global progress

Many health indicators have improved over the long term. According to the current World Bank series, life expectancy at birth rose between 1960 and 2024 from 58.0 to 74.7 years in Vietnam, from 39.6 to 67.6 in Ethiopia and from 46.9 to 65.7 in Ghana. Mortality before the fifth birthday has also fallen globally over several decades, although progress has slowed recently. Developments are not uniform across countries or years. Global life expectancy temporarily declined during the COVID-19 pandemic.

These gains deserve recognition. They do not answer every moral criticism of the economic system or establish the effect of a particular form of commodity trading.

The historical chart below shows estimated global income distributions for 1800, 1975 and 2015. It illustrates how many incomes shifted upwards from very low levels. Income and wealth are different measures, however. The chart establishes neither an even distribution of wealth nor that everyone can meet their needs today. It is a historical approximation in international dollars with a 2011 purchasing power basis, not a distribution statistic for 2026.

The influence of speculators

So what influence do speculators have on commodity prices?

Research reaches different conclusions about speculation and commodity prices depending on the market, period and method. A 2014 FAO paper identifies predominantly fundamental causes in several episodes it examines; a 2011 modelling study by Lagi and colleagues instead attributes a substantial role to speculation. It would therefore be too sweeping to deny critics any empirical basis. Such studies need to be read with their respective assumptions and limitations in mind.

International trade can cushion regional crop failures if alternative sources of supply are accessible. At the same time, international price and supply shocks can be transmitted to domestic markets. Transport capacity, trading conditions and inventories are among the factors that matter. Comparing two precious-metal charts therefore does not establish a general effect of free markets on food prices.

Comparison of historical percentage fluctuations in tungsten and gold prices from1980to2018.
Historical comparison: tungsten and gold,1980–2018. Original graphic from the Academy article. Enlarge graphic ↗

Two distinctions are important for the discussion that follows:

  1. A deeper order book can reduce the immediate price impact of a trade; the number of traders alone does not measure this depth.
  2. Liquidity and longer-term price volatility are different characteristics of a market.

More trading can mean more executable orders. Whether a market actually becomes more liquid depends on their size, price and availability. The identity of the participants and how they trade are therefore far from irrelevant.

Market depth and the price impact of orders

Consider a simplified example: you are at a market and want to buy eggs. Three sellers offer eggs of identical quality, each with the same quantity. Seller 1 asks EUR 1 per egg, seller 2 asks EUR 2 and seller 3 asks EUR 3. Let us also assume that no new offers appear and nobody changes their prices. You buy from seller 1 first. Once that seller’s stock is exhausted, you move to seller 2 and then seller 3. This is a constructed teaching example, not a description of an observed market.

Under these assumptions, the lowest available egg price is initially EUR 1. Once those eggs have been sold, it is EUR 2; once that stock is exhausted too, it is EUR 3. At the lowest price, only one seller’s quantity is available at a time. How quickly it sells also depends on how many eggs buyers demand.

Now imagine 30 sellers instead of three, still with the same quantity per seller. The first 15 ask EUR 1 per egg, another ten ask EUR 2 and the remaining five ask EUR 3. All other assumptions stay the same. What changes?

More quantity is now available at EUR 1. With the same demand, it therefore takes longer to exhaust this quantity. This illustrates market depth. It does not prove that every market with more participants experiences less fluctuation over the long term: real exchanges receive new orders, while others are changed or withdrawn.

Exchanges bring buy and sell orders together. A trader who places an executable passive limit order can provide liquidity; an immediately executed marketable order consumes available liquidity. A speculator is therefore not automatically a liquidity provider in every transaction. A liquid futures market can make hedging easier, but it does not guarantee stable commodity prices.

The purpose of futures exchanges

Producers, processors and other market participants use futures to hedge price risks. A producer might hedge a selling price, while a processor hedges future input costs. Speculators can take on risks and contribute to trading. How affordable and accessible a hedge is depends on the particular market and its conditions.

Exchange trading can be understood as bringing buy and sell orders together. This auction process helps explain how different interests meet. To assess the price impact, however, order size, market depth and the particular conditions must also be considered. This alone does not provide a general rule for a trader’s influence.

Scalpers, daytraders and algorithmic trading systems often operate over short time horizons. Depending on their orders, they can provide or consume liquidity. Their influence on prices cannot be determined from holding periods alone. Even short-term orders moving in the same direction can have a noticeable price impact in a thin market.

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Speculators and price movements

Longer-term price movements depend on several factors, including supply, demand, inventories and expectations. They do not necessarily require a single well-capitalised trader. There is therefore no basis for ruling out the influence of speculators in general. Regulators also consider the risks of excessive speculation; that likewise does not establish that every speculative transaction causes a specific supply crisis.

The historical gold and tungsten charts show different price paths. These commodities differ in their uses and supply structures, among other things. Without matching periods, price definitions and a transparent measure of volatility, no general effect of speculators can be inferred. Tungsten is also not an agricultural commodity. A more volatile chart therefore establishes neither greater power over farmers nor its cause. The illustration should be read as a historical comparison with these limitations.

Do prices keep rising?

Another disputed question is whether speculation can affect the price level. It is sometimes claimed that speculators want to drive commodity prices permanently upwards. Yet speculative actors do not have uniform interests. Neither this sweeping attribution nor its complete rejection follows merely from the existence of buyers and sellers.

Investment

Buying a newly issued share can provide capital to the company. If you buy an already traded share on the secondary market, however, the purchase price generally goes to the seller. You acquire an ownership interest in the company and can participate in its development through distributions or price changes, for example. A profit is not certain. A seller can also have very different reasons for selling later: realising a gain, limiting a loss, needing money or changing their portfolioThe portfolio is the collective term for all assets owned by a client, a company or an investment fund.. The sale alone does not reveal their previous returns.

A previous capital gain for the seller is therefore by no means a prerequisite for this trade.

Speculation

Every open future has a long position and a short position. The contract’s price changes affect their profits and losses in opposite directions. Their overall economic objectives can nevertheless differ, for example when a position hedges a transaction in physical goods.

Shares can also be traded on expectations of rising or falling prices. Speculation is not necessarily short-term, and its participants do not all pursue the same direction. The ability to go long or short establishes neither a continuous rise in prices nor its impossibility. Historical charts show particular past patterns; they do not establish a general law under which commodity prices always stay within fixed ranges.

Example: historical maize prices

The chart below uses monthly World Bank reference prices for U.S. maize, yellow, No. 2 grade, f.o.b. U.S. Gulf ports, in USD per tonne from 1974 to 2020. It shows nominal prices in physical commodity trading, not OHLC prices for a particular futures contract or a reconstructed sequence of futures rolls. For the 2007/2008 food-price crisis, the USDA identifies several interconnected factors, including energy and production costs, demand for bioenergy, weather and policy responses. A price chart alone does not determine the contribution of these factors or speculative behaviour, however. The historical series also does not establish that the price level remained unchanged through 2026.

Maize prices 1974–2020

Monthly reference prices · nominal USD per metric tonne

0100200300400197419801990200020102020
2020-12 · 198.8 USD/t
World Bank Pink Sheet: U.S. no. 2 yellow maize, f.o.b. U.S. Gulf ports. This is not a futures OHLC series or an inflation-adjusted chart. World Bank · Daten

The prices shown are not adjusted for inflation. They therefore do not directly reveal how the real purchasing power of a maize price changed. That would require a suitable deflator, a base year and a transparent calculation method. A freely drawn line does not replace this calculation. The chart therefore contains no purported real-price series; it initially allows a comparison of nominal historical reference prices.

Speculators have different interests: some positions benefit from rising contract prices, others from falling prices.

The CoT reports can be used to examine which trader groups hold which open positions in a particular market. Open positions do not directly measure liquidity or the cause of a price movement, however. They do not establish a general dominance of commercial traders in every market.

A futures contract has a long side and a short side.

Do higher commodity prices harm poorer countries?

Another criticism concerns the burden higher food prices place on poor households. Yet households are not all in the same position.

Writing for IFPRI in 2014, Derek Headey reported a statistical association between higher domestic food prices and lower poverty after economic adjustments. He also identified uncertainty about the mechanism and possible short-term disadvantages. This is an important finding for the discussion, but it does not establish a universal benefit from every price increase.

A household may produce food, buy food for itself and also earn income from work. Higher selling prices can increase revenue; higher purchase prices add to expenditure. Production costs and possible wage adjustments also matter. Whether a household benefits overall depends on this combination and the period considered. This is precisely why a poor country cannot be assumed to experience the same effect for everyone living there.

A study published in 2023 by Headey and Hirvonen examined 33 middle-income countries over 2000–2019. It found a conditional association between higher domestic food prices and lower poverty, particularly in more agrarian countries. The authors explicitly state that they do not establish causation. The studies also do not demonstrate that futures trading causes this prosperity effect. Futures markets can offer price information and hedging opportunities; actual access and effective use are separate questions. Other research by Headey and Ruel also identifies risks to children’s nutrition from food inflation. Poverty rates and nutritional status are different outcomes that should be considered together.

Digital information services can make market and price data more accessible to producers. But access is not uniform: technology, network coverage, costs and skills create constraints. Information alone does not provide access to a futures market or effective hedging.

Research examines links between speculative behaviour, food prices and supply crises using different methods and reaching different conclusions. A price study does not establish that a single futures transaction causes hunger. Conversely, saying there are no empirical indications at all would be too sweeping. The market, period, people affected and other causes need to be identified.

Other causes of supply crises

Infrastructure, storage, distribution, policy interventions, conflict and institutional conditions also need to be considered in supply crises. Their importance depends on the particular case. They deserve attention, but they do not rule out a possible contribution from financial markets in advance. We should therefore not turn a single explanation into an answer to every supply crisis.

Government interventions can disconnect domestic food prices from international markets. Their effects need to be assessed for the particular period: relief within individual countries can amplify international price fluctuations when several countries intervene at once. World-market, spot and futures prices should also not be treated as equivalent without checking. A quantitative country comparison therefore requires comparable products, dates, currencies and an identified price source.

Post-harvest losses are another relevant problem. India’s official 2022 NABCONS survey reports different rates for different products, such as 3.89–5.92% for cereals and 6.02–15.05% for fruit. These figures relate to defined post-harvest losses. They are not a proportion of all food rotting before reaching the market; nor can individual product ranges be combined into a blanket overall rate.

In my view, these issues deserve closer consideration. In a 2015 commentary, Philip Booth argues that the debate should not focus exclusively on financial markets. According to his current profile at St Mary’s University, he is Professor of Catholic Social Thought and Public Policy. His position can contribute a perspective, but it does not replace scrutiny of individual claims. One principle therefore remains important for our own assessment:

Commodity trading cannot be morally justified by a price chart alone, nor can it be blamed indiscriminately for supply crises. What matters is the function a transaction serves and which consequences can actually be substantiated.

Frequently asked questions

How does speculation differ from hedging?

Speculation takes a position in expectation of a price movement. Hedging seeks to limit an existing or planned economic risk, such as a producer’s or processor’s price exposure. The same futures contract can serve different purposes for participants.

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Does a price increase prove that speculators caused it?

No. Harvests, production costs, weather, demand, inventories and policy responses can affect prices. A price chart alone does not separate their contributions. A claim about speculative behaviour requires suitable data and an appropriate investigation.

Does speculation always reduce price fluctuations?

No general guarantee can be made. Futures markets can support hedging and price information, but effects depend on market structure and behaviour. A historical comparison of gold and tungsten prices does not establish a general causal effect of speculation on food prices.

Are higher food prices good or bad for poorer people?

Effects can differ between buyers, producers and regions. Higher prices may raise some agricultural incomes while burdening households that buy food. An observed relationship between prices and falling poverty proves neither a general improvement nor that futures trading caused it.

Which data does the historical maize-price chart show?

The maize-price chart shows 564 monthly World Bank reference prices from January 1974 to December 2020 in nominal U.S. dollars per metric tonne. The series concerns U.S. no. 2 yellow maize, f.o.b. U.S. Gulf ports. It is neither a futures OHLC series nor inflation-adjusted. It does not by itself show changes in real purchasing power.

Is trading commodities on an exchange inherently immoral?

The moral assessment of commodity trading depends on the purpose and consequences of the particular transaction. Price hedging, speculation and the supply of physical goods serve different functions. Economic studies can examine consequences; moral conclusions also require an assessment of responsibility and competing interests.

Sources and context

Editorial sources checked 6 October 2026. Historical data and views are identified by their respective periods.

  1. CME – Futures expiry and contract rollsClosing, rolling or settling futures positions; no blanket broker liquidation guarantee.
  2. Xetra-Gold – Product structure and delivery entitlementAn example of a specific gold ETC with backing and a delivery entitlement, without ownership of bars; not a description of every product.
  3. Deutsche Bundesbank – How money is createdDeposit-money creation and its constraints; no mechanical tenfold multiplier.
  4. Vatican – Evangelii gaudium (2013), paragraph 53Original source and context of the criticism of an exclusionary economy.
  5. Vatican – Pope Francis at the FAO (11 June 2015)Primary source for his specific criticism concerning food prices and financial speculation.
  6. Gapminder – Authors of FactfulnessThe authors and publication year of Factfulness; the book’s figures are historical.
  7. World Bank – September 2026 Global Poverty UpdateData year 2024: 10.1%; international poverty line USD 3.00 in 2021 purchasing power parity terms. The figure for 2026 is a nowcast.
  8. World Bank – June 2025 update to poverty linesPoverty lines and purchasing power bases change; older and newer figures should not be compared without checking.
  9. World Bank WDI – Life expectancy at birth, SP.DYN.LE 00.INLife expectancy at birth in 1960 and 2024; dataset updated 13 July 2026, figures rounded to one decimal place.
  10. UNICEF – Mortality before the fifth birthdayLong-term global decline, with slower progress recently; no guarantee of annual improvement everywhere.
  11. WHO – COVID-19 and global life expectancyGlobal life expectancy declined between 2019 and 2021; progress is not necessarily continuous.
  12. Our World in Data – Historical global income distributionHistorical illustration for 1800, 1975 and 2015 in 2011 international dollars; an approximation, not a dataset for 2026.
  13. FAO – Testing for bubbles in agricultural commodity markets (2014)A 2014 study of price bubbles in 28 agricultural commodities; historical results depend on the market and episode.
  14. Lagi et al. – The Food Crises (2011)A 2011 modelling study of speculative behaviour and biofuels as potential historical price drivers; not a universal causal finding.
  15. CFTC – Speculative position limitsU.S. market oversight considers price distortion from excessive speculation; this does not establish causation in a specific case or state German law.
  16. CME – Liquidity and order-book depthLiquidity measures include spreads, order-book depth and order price impact, rather than the trader count alone.
  17. CME – Market participants and hedging with futuresFutures hedging and speculative risk-taking; an illustrative transaction is not a measurement of market effects.
  18. SEC Investor.gov – Secondary marketInvestors trade securities that have already been issued.
  19. SEC Investor.gov – Primary marketNewly issued securities provide proceeds to the issuer; distinct from secondary-market trading.
  20. CFTC – Explanatory notes for CoT reportsAggregate long and short open positions and trader classifications; open positions do not directly measure liquidity.
  21. USDA/ERS – Food prices and their driving factors (2008)Several interconnected supply, demand, energy and policy factors behind the historical crisis.
  22. IFPRI/Headey – Food prices and poverty (2014)Domestic relative food prices and their association with poverty; the mechanism is uncertain and short-term disadvantages are possible.
  23. Headey/Hirvonen – Food prices, poverty and production (2023)33 middle-income countries over 2000–2019; a conditional association, explicitly not a finding of causation.
  24. Headey/Ruel – Food inflation and child undernutrition (2023)Food inflation and child undernutrition in 44 countries; not direct evidence of futures trading causing hunger.
  25. FAO – Digital agriculture and barriers to access (2022)Ten case studies covering digital opportunities and limited access for small-scale producers.
  26. Indian Ministry – Post-harvest losses (NABCONS 2022)The 2022 NABCONS survey reports product-specific Indian post-harvest losses, not a blanket 50% overall rate.
  27. Philip Booth – Commentary on food prices (2015)A primary source for his own opinion; its 60% rice-price claim concerns Indonesia and its 50% India figure is not independently established.
  28. St Mary’s University – Philip BoothCurrent university profile: Catholic Social Thought and Public Policy; the previously attributed closing quotation is not verified here.
  29. World Bank – Transmission of international food prices (2012)Market integration and price transmission depend on conditions; international trade does not prevent every price burden.
  30. World Bank – Food Price Shocks (April 2019)Domestic price insulation can amplify global movements; policy has several potential effects rather than being uniformly harmful.
  31. World Bank – Commodity Price Data (Pink Sheet)Official source of World Bank Commodity Price Data. The historical monthly dataset used is linked separately; the chart shows nominal reference prices, not futures OHLC prices or an inflation adjustment.
  32. World Bank – Historical monthly commodity prices, updated 2 October 2026Monthly Prices, column AE/31, Maize, in nominal USD per metric tonne. No. 2 grade, yellow, f.o.b. U.S. Gulf ports. 564 months from January 1974 through December 2020; workbook updated 2 October 2026 and retrieved and checked on 6 October 2026.
Further reading

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Investing vs. Speculating: Beauty and the Beast of MarketsRead article →COT Data in Trading: How to Read PositioningRead article →Dealer Hedging: How It WorksRead article →

Should I buy Gold and precious metals physically or through an exchange?

Should I buy Gold and precious metals physically or through an exchange?

by | Jul 5, 2021 | Investing

← All articles
A conceptual illustration of gold and precious-metal investment.
Investing

Should I buy Gold and precious metals physically or through an exchange?

TradeNeon Academy
Originally published · 18 min read

There are different ways to buy gold and other precious metals. This comparison examines physical holdings and exchange products: costs, custody, risks and differences in tax treatment.

Image: TradeNeon

Is investing in precious metals worthwhile?

Gold and silver have a long history as stores of value and means of payment

Gold and silver have been used as stores of value and means of payment for a long time. This does not guarantee investment success today. Whether precious metals fit your portfolioThe portfolio is the collective term for all assets owned by a client, a company or an investment fund. depends on your objective, time horizon, capacity for losses and existing investments. Some investors use gold for diversificationThe term diversification refers to the spreading, or allocation of assets across different investment types, industries or economic regions. or as a reserve. Its price can still fall; neither reliable protection against inflation nor a particular return is promised. Compare an investment in metal with alternatives on a consistent basis of risk, costs and returns.

What returns have precious metals delivered?

Returns on gold

Let us first consider returns. Gold’s performance depends on the period, currency and data series examined. Your investment also depends on the purchase price, subsequent selling price and trading, custody and insurance costs. Historical return figures require identifiable start and end dates and a clear calculation method. A price increase before costs is not your personal net return. Past price movements guarantee neither a future return nor reliable protection against inflation.

A comparison with stocks or rental property also needs matching periods, currency and comparable costs and income. The metal price alone, a stock index’s total return including dividends and a property’s rental yield are different measures. They do not establish that gold always performs better or worse in terms of returns and fluctuations. The following original graphic shows a historical period; it is not current market analysis.

Historical gold-price chart from the2021Academy article.
Historical original gold-price chart from the2021Academy article. Enlarge graphic ↗

Historical original graphic from the July 2021 article. It does not establish a complete 30-year return series or show the current gold price.

Returns on silver

Silver’s price follows a different path from gold’s and can fluctuate substantially over extended periods. An investor who buys at a high price may still face losses years later. Past returns alone do not establish that silver has better future prospects. A sound comparison requires defined periods, the same currency and traceable data. The graphic shows a historical period as presented in the July 2021 article. It establishes neither a complete 30-year return nor today’s distance from previous highs.

Historical silver-price chart from the2021Academy article.
Historical original silver-price chart from the2021Academy article. Enlarge graphic ↗

Historical silver-price graphic from the July 2021 article. The illustration and outlook from that time are neither a current price quote nor evidence of returns in 2026.

Gold and silver may complement a portfolio through diversification because their performance can differ from that of other asset classes. Whether this helps depends on the overall composition and period examined. Precious metals can also lose value; calling them a safe haven does not guarantee preservation of value in every crisis. A reserve of metal does not automatically replace readily available funds for ongoing expenses.

Returns on platinum and palladium

Platinum and palladium have industrial uses and their prices may also fluctuate substantially. Whether they are more volatile than gold or silver depends on the period and measurement method; no permanent ranking is established here. Beyond choosing a metal, consider which investment structure suits your purpose: physical goods, an exchange-traded security and a derivative have different costs and risks.

How are physical precious metals taxed in Germany?

Taxation of gold

For tax purposes, distinguish buying from subsequently selling. This section covers ordinarily held physical precious metals in private assets in Germany, as of 6 October 2026. Investment gold is exempt from VAT under the conditions of section 25c of the German VAT Act(UStG). This applies to legally defined bars, wafers and coins, not indiscriminately to every gold product, piece of jewellery or collector’s offer. Income tax on a possible later sale gain is a separate question. Commercial trading, special income-generating arrangements or residence in another country may require different treatment.

What qualifies as investment gold?

Bars or wafers must have a weight accepted by the bullion markets and a purity of at least 995 thousandths.

Gold coins must have a purity of at least 900 thousandths, have been minted after 1800, and be or have been legal tender in their country of origin.

These coins must also usually sell at a price that exceeds the open-market value of their gold content by no more than 80 percent.

These conditions apply together. The description gold or investment coin does not replace checking the actual product.

A later private sale

For ordinarily held physical precious metals, section 23 of Germany’s Income Tax Act(EStG) generally applies. If no more than one year passes between purchase and sale, a gain may be taxable at your personal income-tax rate. After more than one year, such an ordinary sale generally falls outside this one-year period. If the asset was used to generate ongoing income, possible special rules require separate examination.

The total gain from private disposals is tax-free if it is less than EUR 1,000 in the calendar year. This is an exemption threshold, not a deductible allowance: once the threshold is reached, the ordinarily taxable entire gain is subject to tax, rather than only its excess. Other private disposals in the same year may count towards it. Relevant factors include purchase and selling prices and eligible costs; keep the records.

These rules are not a general tax exemption for ETCs, futuresA future is a standardized forward contract that obligates the trading partners to a transaction in the future. or options. Examine their product structures and applicable income-tax rules separately.

In Germany, cash purchases of precious metals generally trigger statutory due-diligence and identification obligations for goods dealers from EUR 2,000. An amount below this threshold does not guarantee anonymity; suspicious transactions, for example, can trigger obligations regardless of value. Related actions must be considered together as a transaction. This cash threshold is not a tax allowance. It establishes neither a general family exemption nor a reliable way around identification by splitting purchases over time.

Taxation of silver

Silver has no general VAT exemption equivalent to investment gold. An ordinary dealer sale of silver bars or investment coins under standard taxation in Germany generally attracts 19 percent VAT. For certain coins and eligible acquisition routes, a reseller may apply the margin scheme: VAT is then calculated on the reseller’s margin and remains included in the price. This does not make silver tax-free for the buyer.

The margin scheme has specific conditions

Section 25 a UStG requires, among other conditions, a reseller and an eligible acquisition chain: within the EU, the goods must have been supplied under one of the tax arrangements specified by law. Certain raw forms of precious metals are explicitly excluded by their customs classification. For coins, the actual tax and customs classification matters. An eligible case may involve acquiring a suitable coin from a private seller; this is not a rule for every silver coin or import.

Check which tax treatment the dealer applies to the specific offer and the stated final and repurchase prices. Do not compare offers solely by the phrase margin taxed.

In ordinary sales of silver bars under standard taxation in Germany, the general 19 percent VAT rate usually applies. This affects total costs but does not automatically make the product unsuitable for every private buyer. Compare purchase and repurchase prices, denominations, trading spreads, custody and insurance. A later private sale must be considered separately under the applicable income-tax rules.

The shape of a coin bar alone does not determine its VAT treatment. An imprinted face value or the description coin creates no blanket tax exemption and does not make every silver bar eligible for the margin scheme. The actual classification and statutory requirements for the tax treatment applied are decisive. Examine the dealer’s specific offer and final price rather than treating a coin bar as a universally tax-free solution.

Taxation of platinum and palladium

For ordinary physical platinum and palladium products sold under standard taxation in Germany,19 percent VAT generally forms part of the cost comparison. This establishes neither general unsuitability nor a universal 19 percent profit threshold. Your actual result reflects purchase price, subsequent proceeds, premiums and discounts, trading spreads, custody costs and price movements together. A later private sale is also considered separately under the applicable income-tax rules. Special products or acquisition circumstances require individual examination.

Tax is therefore one part of the assessment. A comparison between physical metal and an exchange product also involves price, trading spreads, recurring costs, custody, access and legal structure. Which differences matter most depends on your purpose. This brings us back to the question: what role should the investment fulfil?

What are the ways to invest in gold?

Buying gold investment coins

Consider a well-known gold investment coin: the Royal Canadian Mint’s Maple Leaf. It is offered as a bullion product. Compare its costs against gold content, denomination and the current offer. Collector-oriented coins may include additional price components; this does not establish a universal ranking of premiums across all coins and dealers.

Before a coin reaches a buyer, several services are needed, including extracting or recovering the metal, refining, minting, quality testing, transport and distribution. The Royal Canadian Mint describes refining and coin manufacturing among its own activities. The actual supply chain can vary; not every coin necessarily passes through the same banks, wholesalers or testing bodies. These services, together with supply and demand, may be reflected in the dealer’s price.

A Maple Leaf gold coin illustrating a physical precious-metal investment.

Premiums over the metal value vary by denomination, coin, dealer and market conditions. The original article’s historical calculation from July 2021 assumed a gold price of EUR 1,512 and a dealer price of EUR 1,562 per ounce. The EUR 50 difference is approximately 3.3 percent of the assumed metal price. The dealer quote cited at the time has not been independently reconfirmed here as reliable market evidence; the example is neither a current offer nor a return figure. For a comparison today, obtain an actual purchase quote and a simultaneous repurchase quote, including all costs.

Trading gold through brokers and certificates

Brokers offer different instruments linked to the gold price. A name such as Gold or XAU/USD alone does not tell you whether you are trading physical holdings, a CFD, a certificate or another product. Check the instrument, venue, pricing, costs, leverage, counterparty and protections applicable to you. Certificates are debt securities and may also trade on an exchange. Exchange trading does not eliminate issuer or market risk. A blanket claim that all prices are set exclusively by a broker or bank and never formed on an exchange is therefore inaccurate.

Trading gold through futures

A future provides another way to trade exposure to gold prices. CME’s Micro Gold future MGC represents 10 troy ounces, making it smaller than the 100-ounce gold contract. Its smaller size does not automatically suit every small account or establish consistently sufficient liquidity. Check contract value, tick value, margin, position size and loss and execution risks. Margin is collateral, not a general maximum loss. Margin-call obligations and customer protections depend on matters including the contract, client status and jurisdiction. Futures expire and have product-specific delivery and settlement rules. MGC has a physical settlement structure; brokers may impose earlier closing deadlines. To maintain market exposure beyond expiry, you can close a position in time and open a later contract. Rolling may incur trading costs and spreads; the futures curve and differences between contract prices also influence performance. A roll is not necessarily an immediate debit of a fixed roll loss. Derivatives therefore require different planning from a purely long-term metal reserve.

Trading gold through ETCs

ETCs(Exchange Traded Commodities) provide exchange-traded exposure to commodities. They are generally debt securities rather than fund units such as ETFs. Physically backed and derivative-based ETCs differ in price tracking, backing and risk structure. Read the key information document, prospectus and terms of the specific product. Physical backing is a relevant structural feature, but neither an overall ranking as best nor a guarantee of value. The suitable structure depends on your objective and the overall assessment.

ETCs also provide access to silver, platinum and palladium. Physical backing does not automatically make you the owner of specific bars. A debt security gives you the claims against the relevant entity set out in its terms. Whether delivery rights exist, who can exercise them, and applicable denominations, fees, deadlines and other conditions depend on the product. Take such a right seriously and examine it. Also check what backing the prospectus requires, how it is evidenced and what enforcement rights apply if problems arise.

ETCs involve issuer, market and product-structure risks. Physical backing may shape risks differently but does not automatically eliminate them. Collateral, ranking, custodian, enforcement rules and the extent of claims matter. In the iShares example examined, claims are limited to the relevant secured assets; if these are insufficient, claims may remain unpaid. This is a specific product structure, not a statement about every ETC. The consequences of insolvency depend on the structure and assets actually available. Assess these conditions alongside costs and the losses you can afford.

Gold ETCs do not all receive the same tax treatment

Tax treatment depends on the documented claims and specific product structure. In its decision of 16 June 2020, case VIII R 7/17 concerning Gold Bullion Securities, Germany’s Federal Fiscal Court did not classify gains under the conditions considered as an ordinary capital claim under section 20 EStG. Relevant factors included a claim primarily directed at physical gold delivery and the issuer’s obligation to use almost all supplied capital to acquire gold.

This product-specific case law may make section 23 EStG relevant. It does not promise the one-year rule or tax exemption for every physically backed ETC. Check the current terms and tax treatment of the specific security. Futures, options and CFD transactions are likewise not treated as ordinarily held physical gold solely because they reference gold; applicable derivatives rules may fall under section 20 EStG.

Physical gold versus ETCs

Advantages of physical precious metals

You can hold physical precious metals yourself; access then does not directly depend on a securities account. This does not protect against theft, loss, damage or price falls. Storage options include a suitable personal safe, a bank safe-deposit box or a specialist custodian. Compare security, insurance, access, contractual terms and costs. With third-party custody, also examine ownership and release claims. If you consider metal a crisis reserve, plan realistically how you can access it. Hiding it at home is not generally the best solution, and access to a safe-deposit box follows different conditions from a securities claim.

Advantages of ETCs

You can buy and sell ETCs through a securities account on the relevant trading venues. Execution depends on trading hours, market conditions and liquidity; access at any time at a specific price is not guaranteed. Compare order and venue charges, bid/ask spreads, product costs and account costs against dealer premiums, custody and insurance for physical metal. An ETC may cost less, but a comparison requires a specific product, amount and holding period. Market price and reported product value can differ. Product structure and currency movements also affect the result; trading a product in euros does not itself mean it is currency hedged. A metal-price increase does not automatically produce a profit after costs, and a falling price can cause losses.

This brings us back to the original question: what is your purpose?

Your purpose determines how to buy precious metals

Physical precious metals as a reserve for retirement or a potential crisis

If you want to hold gold or silver for many years as part of a reserve, physical ownership may have a role. Whether home storage, a safe-deposit box or a custodian suits you depends on security, access, insurance and costs. Premiums and trading spreads still matter over a long holding period. An isolated EUR 50 or EUR 100 amount is not enough to judge costs without considering metal quantity, investment amount and holding period. Reserve planning should also consider how you would actually sell when needed and which funds you need at short notice for other expenses.

ETCs for portfolio diversification

For frequent buying and selling, physical metals are often less practical because of trading spreads and handling. ETCs may offer an alternative in a securities account, but still require deliberate assessment of your objective, costs, risks and specific terms. A documented delivery claim is not merely non-binding paperwork: examine its scope, exercise conditions and costs for the product. Neither blanket reassurance nor a blanket dismissal of all delivery claims is accurate. What matters is the role the investment should play in your portfolio and the risks you can bear.

Active short-term trading in futures or futures options is a different approach from a purely long-term metal reserve. It requires knowledge of markets and products, a suitable loss budget and monitoring of positions and execution. Analysis tools help assess markets; they secure neither profits nor additional income.

Frequently asked questions

Is gold tax-free in Germany?

Only legally defined investment gold is exempt from VAT under section 25c UStG. A later private sale requires separate assessment: for ordinarily held physical precious metals, a sale after more than one year generally falls outside the one-year period of section 23 EStG. A gain within that period may be taxable. Under the stated conditions, private disposal gains remain tax-free if their total is less than EUR 1,000 in the calendar year. This is an exemption threshold, not a deductible allowance. Special cases may differ.

Can I buy precious metals anonymously with cash?

In Germany, precious-metal cash purchases generally trigger statutory due-diligence and identification duties for goods dealers from EUR 2,000. Suspicious transactions may trigger duties regardless of value, and related actions count together. A value below the threshold does not guarantee anonymity.

Is margin-taxed silver free of VAT?

No. An ordinary dealer sale under standard German taxation generally attracts 19 percent VAT. In an eligible margin-scheme transaction, VAT is calculated on the reseller’s margin and remains included in the price. Product classification and acquisition chain must satisfy section 25a UStG.

Do I own the bars in a physically backed ETC?

Not automatically. ETCs are generally debt securities. You hold the claims documented by the specific product. Check collateral, custody, ranking, enforcement rules and any delivery rights in its prospectus and terms. Physical backing does not universally eliminate market or issuer risks.

Does the one-year rule apply to every gold ETC?

No. The German Federal Fiscal Court’s 16 June 2020 judgment on Gold Bullion Securities concerned a specific structure with a claim primarily directed at physical gold delivery. It does not promise tax exemption for all physically backed ETCs. Examine the actual claims and applicable tax treatment.

Why are gold futures different from ordinary metal holdings?

Futures have a contract size, expiry and settlement rules. The Micro Gold future MGC represents 10 troy ounces and has a physical settlement structure. Margin is collateral, not a general loss limit. Longer exposure requires planning for deadlines, delivery rules, rolling and costs. A smaller contract alone does not establish suitability for every small account.

Can I try the gold market in the Futures Insights Free Plan?

Yes. The Gold (GC) market is included in the Futures Insights Free Plan with all indicators. Futures Insights 2.0 offers 26 markets in total for analysing further markets.

Activate Free Plan

Sources and context

Editorial sources checked 6 October 2026. Historical data and views are identified by their respective periods.

  1. Investment gold: Definition and VAT exemptionGermany: section 25 c conditions; not an exemption for every gold product.
  2. Private disposals in GermanyGermany, ordinary private assets: more than one year and an annual gain strictly below EUR 1,000; special cases may differ.
  3. German VAT rateGermany: ordinary 19 percent rate; check product and acquisition exceptions.
  4. German VAT margin schemeReseller, acquisition-chain and customs conditions; no general exemption for silver coins.
  5. Anti-money-laundering due diligencePrecious-metal cash purchases from EUR 2,000; additional triggers possible; not a tax allowance.
  6. Related transactions under the German AML ActRelated actions may constitute one transaction.
  7. Capital income and derivatives transactionsGermany: derivatives do not automatically follow the metal holding-period rule.
  8. Federal Fiscal Court 16 June 2020: VIII R 7/17Product-specific Gold Bullion Securities judgment; no automatic application to all ETCs.
  9. Risks of gold and precious-metal investmentsCFTC: U.S. context on price, costs and leverage; U.S. authorisation rules and example prices not adopted here.
  10. Cost questions for physical precious metalsCFTC/FINRA: assess costs, repurchase and custody; no blanket storage recommendation.
  11. Maple Leaf and bullion productsRoyal Canadian Mint: investment-coin context; no universal premium ranking.
  12. Refining and manufacturing servicesRoyal Canadian Mint: production services; no universal supply chain.
  13. Micro Gold FuturesCME:10 troy ounces and settlement structure; no automatic suitability or liquidity guarantee.
  14. Futures expiry and rollingCME: expiry and rolling; examine actual broker deadlines separately.
  15. Futures curves: Contango and backwardationCME: contract and spot-price relationships; no fixed roll-loss debit.
  16. Futures marginCME: collateral and exposure; historical examples are not current margin requirements.
  17. Order types and executionCME: limit, stop and execution rules; no guaranteed maximum stop loss.
  18. Xetra-Gold product termsProduct-specific legal and delivery structure; no general ETC guarantee.
  19. iShares Physical Gold ETCProduct-specific limited-recourse, collateral and market-price structure; no recommendation or guarantee.
  20. Exchange trading of certificatesDeutsche Börse: exchange trading does not imply general product safety.
Further reading

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Investing vs. Speculating: Beauty and the Beast of MarketsRead article →COT Data in Trading: How to Read PositioningRead article →Dealer Hedging: How It WorksRead article →