Cotton
Cotton trading can be used to bet on global stockpiling, hedge against inflation, and speculate on oil prices. Its widespread application in the textile industry makes it a popular soft commodity with online traders. This manual unpacks key manufacturing countries and companies, strategy considerations, market economics, and cotton trading vehicles. Our experts have also reviewed and ranked the top cotton brokers:
Best Cotton Brokers UK
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AvaTrade is a leading forex and CFD broker, established in 2006 and regulated across 9 jurisdictions. Over 400,000 users have signed up with the broker which processes over 2 million trades each month. The firm offers multiple trading platforms, including MT4, MT5, and a proprietary WebTrader. 1250+ financial instruments are available for trading, alongside a comprehensive education center and multilingual customer support.
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Founded in 2002 in Poland, XTB now serves more than 935,000 clients. The forex and CFD broker combines a heavily regulated trading environment with an extensive selection of 5,600+ assets and a commitment to trader satisfaction, featuring an intuitive in-house platform with superb tools to support aspiring traders.
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Spreadex is an FCA-regulated broker that offers spread betting opportunities on an impressive 10,000+ CFD instruments including 60 forex pairs. Traders can also take short-term positions on sporting events. The brand has been around for over 20 years and has won multiple awards.
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Established in Australia in 2010, Pepperstone is a top-rated forex and CFD broker with over 400,000 clients worldwide. It offers access to 1,300+ instruments on leading platforms MT4, MT5, cTrader and TradingView, maintaining low, transparent fees. Pepperstone is also regulated by trusted authorities like the FCA, ASIC, and CySEC, ensuring a secure environment for traders at all levels.
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XM is a globally recognized forex and CFD broker with 10+ million clients in 190+ countries. Since 2009, this trusted broker has been known for its low fees on 1000+ instruments. XM is regulated by multiple financial bodies, including the ASIC and CySEC.
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Founded in 1999, FOREX.com is now part of StoneX, a financial services organization serving over one million customers worldwide. Regulated in the US, UK, EU, Australia and beyond, the broker offers thousands of markets, not just forex, and provides excellent pricing on cutting-edge platforms.
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eToro is a top-rated multi-asset platform which offers trading services in thousands of CFDs, stocks and cryptoassets. Launched in 2007, the brand has millions of active traders globally and is authorized by tier one regulators, including the FCA and CySEC. The brand is particularly popular for its comprehensive social trading platform. Cryptoasset investing is highly volatile and unregulated in the UK and some EU countries. No consumer protection. Tax on profits may apply. 76% of retail CFD accounts lose money.
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InstaForex is a forex and CFD broker founded in 2010. The broker offers diverse market coverage to millions of clients, spanning traditional assets like currencies and shares, as well as other interesting opportunities such as IPOs.
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Founded in 2009, Vantage offers trading on 1000+ short-term CFD products to over 900,000 clients. You can trade Forex CFDs from 0.0 pips on the RAW account through TradingView, MT4 or MT5. Vantage is ASIC-regulated and client funds are segregated. Copy traders will also appreciate the range of social trading tools.
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Established in 2008 and headquartered in Israel, Plus500 is a prominent brokerage that boasts over 25 million registered traders in over 50 countries. Specializing in CFD trading, the company offers an intuitive, proprietary platform and mobile app. It maintains competitive spreads and does not charge commissions or deposit or withdrawal fees. Plus500 also continues to shine as one of the most trusted brokers with licenses from reputable regulators, including the FCA, ASIC and CySEC.
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Fusion Markets is an online broker established in 2017 and regulated by the ASIC, VFSC and FSA. It is best known for its low-cost forex and CFD trading, although its multiple account types and copy trading solutions cater to a range of traders. New clients can sign up and start trading in 3 easy steps.
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Markets.com is a respected broker, offering multi-asset trading opportunities through CFDs or spread betting (UK only). Established in 2008, the brand has an impressive 4.3 million registered customers and is overseen by trusted regulators, including the FCA, ASIC and CySEC. 79.1% of retail accounts lose money.
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Founded in 2015, VT Markets maintains its position as a top Australian multi-asset CFD broker. With 1000+ tradeable instruments and support for the MetaTrader 4 and MetaTrader 5 platforms, this broker delivers a wide range of trading opportunities to over 200,000 clients worldwide. VT Markets is regulated by the ASIC, FSCA, and SVGFSA.
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Trade.com is a trustworthy online broker with a global presence. The broker offers 2,100+ CFDs in major markets, as well as futures, options and more. The broker offers best-in-class platforms and superior analysis tools for experienced traders. The broker is also regulated by top-tier authorities including the FCA and CySEC.
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Grand Capital is a MetaTrader broker with welcome bonuses, trading competitions and an intuitive copy trading service. Several account types and 400+ assets provide trading opportunities for various types of investors and strategies. New users can also open an account and start trading in a matter of minutes.
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IronFX is a multi-regulated forex and CFD broker founded in 2010. This award-winning firm offers 500+ markets to over 1.5 million clients across 180 countries. Traders can access various account types with competitive pricing on the MT4 platform, as well as 24/5 customer support in 30 languages.
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Dukascopy is an online broker operated by a Swiss-regulated banking group. It offers a good selection of 500+ markets, with forex, stocks, gold, ETFs, indices, bonds and cryptocurrencies available. It also offers flexible trading opportunities through the choice of CFDs or binary options. Traders will use MetaTrader 4 or a proprietary platform that is well-suited to automated trading.
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Pacific Union Prime is an FSCA and offshore-regulated multi-asset broker offering competitive fees and direct market access on forex, commodities, stocks, bonds and indices. The broker supports the popular MetaTrader 4 and MetaTrader 5 platforms and a proprietary mobile app. Fees vary by account type with no commission and spreads from 1.9 pips on the Standard account and $7 commission per lot and spreads from 0.4 pips on the Prime account.
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SimpleFX is an online broker specializing in CFD and cryptocurrency trading, with multi-currency accounts, STP execution, low pricing and no minimum deposit. Bringing innovation and gaining recognition at numerous industry events since 2014, SimpleFX now caters to retail traders from over 190 countries, boasting a client base exceeding 200,000 active users.
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Errante is a Cyprus-based and regulated forex and CFD broker with leveraged trading on multiple assets, tiered accounts including a zero-spread option, and copy trading support. The broker offers leveraged trading up to 1:30 under its CySEC-regulated branch and 1:500 from an offshore branch, and supports the MetaTrader 4 and MetaTrader 5 platforms. Errante's asset list is relatively limited but it does offer fast execution and low latency, and it is a trustworthy brand.
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ActivTrades is a UK-headquartered CFD and forex broker established in 2001. The brokerage is heavily regulated with licenses from the FCA, SCB, CSSF, BACEN & CVM and CMVM. Over 1000 CFDs are available spanning 7 asset classes. Over 93.60% of orders are executed at the requested price. ActivTraders also offers a selection of leading trading platforms, including MT4, MT5, TradingView and ActivTrader platforms.
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Established in 2005 in Australia, FP Markets is an ASIC- and CySEC-regulated broker boasting an extensive suite of tradable assets. Its Standard and Raw accounts cater to traders at every level, while it packs a punch in the tooling department, from the MetaTrader suite and intuitive TradingView to actionable trading ideas from Trading Central and AutoChartist.
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HYCM is an online broker with authorization from four international bodies including the FCA and CySEC. The broker offers short-term CFD trading on forex, shares, commodities, indices, ETFs and Bitcoin, and supports the MT4 and MT5 platforms, as well as Trading Central analysis.
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Fortrade is a multi-asset, multi-regulated broker with branches regulated by the FCA, CySEC and ASIC among others. The brand offers trading opportunities on a wide range of instruments including stocks, bonds, commodities, forex, indices, cryptocurrencies and ETFs, with competitive fees and support for MetaTrader 4 and a proprietary platform.
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Admirals is an FCA- and ASIC-regulated broker with an excellent range of leveraged instruments, including forex, stocks, indices, ETFs, commodities, cryptos and more. The broker supports the MetaTrader 4, MetaTrader 5 and TradingCentral platforms. With both spread betting and CFDs available and thousands of instruments, this broker provides more flexibility than most rivals.
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Infinox is a UK-based and FCA-regulated broker that offers diverse trading products thanks to its STP and ECN account types and support for MetaTrader 4, MetaTrader 5 and a proprietary platform. Clients can also benefit from a free VPS that can support automated strategies and a social trading platform, catering to both beginner and seasoned traders.
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Capital.com offer CFDs on a range of markets with competitive spreads and zero commissions. The broker also offers the Investmate app, negative balance protection and leveraged trading.
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Trading 212 is a European and UK-regulated CFD broker that also offers stock investing and ISAs. It’s best known for its commission-free trading model and beginner-friendly app, which has helped it attract 2.5 million users and £3.5 billion in client assets.
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LegacyFX is a multi-asset broker offering an MT5 download & free signals.
Cotton Trading Basics
Cotton is primarily used in the textile industry to make clothing, bedding, and curtains. Its application also extends to a variety of other items, including tents, book binds, bank notes, and even gear for astronauts.
The price of cotton can fluctuate for a variety of reasons, including government subsidies, an increase or decrease in the production of competing materials, plus sales of stockpiles by key suppliers like India and China.
The Intercontinental Exchange (ICE) plays an important role in trading futures and options in the soft commodity. Futures are standardised agreements to buy or sell an asset at a predetermined price and date in the future. ICE cotton futures are a key benchmark for the global cotton industry.
Traders can speculate on the price of the cotton through a variety of vehicles, from futures and options to CFDs and stocks in companies involved in the cotton industry.
History
Cotton trading dates back centuries and was one of the first commodities traded on a global scale. Initially, it was mainly produced in India and exported to Europe. The market was dominated by British companies, who played a significant role in shaping the global cotton trade.
By the mid-1800s, the United States had surpassed India as the world’s largest cotton producer, and cotton trading had become a global industry.
Between 2000 and 2010, world cotton production increased from 89 million bales to 117 million bales, a 32% increase. During this time, China emerged as the largest consumer of cotton, consuming over 50% of the world’s supply. Additionally, the use of technology in cotton trading increased, with electronic trading platforms such as ICE becoming popular.
Post-2000s, cotton trading continues to be a vital part of the global economy. Cotton is still one of the world’s most important cash crops, with an estimated 20 million people involved in its production.
The market is highly competitive, with companies from around the world involved in cotton trading. Technological advancements have further increased the efficiency of cotton production and investment, with the use of blockchain technology and artificial intelligence becoming more prevalent.
Cotton is still mainly produced in countries with weather that accommodates cotton crops, such as India or Pakistan, however it is traded globally including in the UK.
Price Chart
Factors That Influence The Price Of Cotton
- International demand and supply: The global supply and demand of cotton is a major factor in its price, and fluctuations in demand from major importers such as China play a key role.
- Economic indicators: Inflation rates, exchange rates, and interest rates can impact the price of cotton. If the value of the dollar rises against other currencies, this can lead to a decrease in the price of cotton as it becomes more expensive for foreign buyers.
- Weather patterns: If weather conditions are unfavourable for cotton crops, such as droughts or heavy rains, this can limit the supply of cotton and increase its price.
- Government policies: Trade agreements and subsidies can influence the price of cotton. If a government provides subsidies to cotton producers, this can increase supply and lower prices.
- Technology: Technological advances in cotton production can impact the price of cotton. If new technology makes it easier and more cost-effective to produce cotton, this can increase the supply and lower prices.
- Production costs: If companies face pressure from high production costs, this can limit the supply of cotton and increase its price.
Benefits Of Trading Cotton
- Cotton is volatile which opens up opportunities for profit
- It can be used to speculate on rising oil prices due to a high correlation
- Similar to other commodities, it can be used as a hedging tool against inflation
- Cotton trading is available through various vehicles, including leveraged CFDs, futures and options
Risks Of Trading Cotton
- High volatility also increases the chance of large losses
- Cotton is heavily influenced by weather conditions which can be hard to predict
- Cotton is primarily traded by large firms and institutions so the choice of retail brokers is limited
How To Trade Cotton In The UK
There are several ways for UK traders to participate in the cotton trading market:
- Stocks: Buying and selling shares of companies in the cotton industry, either through the production or sale of related items like clothes, is another way to bet on cotton prices. Importantly, share dealing is a more indirect way to speculate on the price of cotton. Popular cotton stocks include Deere & Company and FMC Corporation.
- ETFs: Cotton ETFs provide exposure to the soft commodity, alongside other assets, such as agricultural commodities. They are essentially a group of assets traded on an exchange, reducing risk through diversification. Popular cotton ETFs include the iPath Series B Bloomberg Cotton Subindex Total Return ETN.
- CFDs: A popular choice among UK retail traders who want to speculate on cotton prices without taking ownership of the physical commodity. By using CFDs, traders can open positions that bet on the future direction of cotton prices. With the use of leverage, traders can also amplify their potential profits or losses. CFDs do not have a fixed expiration date, so traders can hold their positions for as long as they want, though they are typically used for short-term trading strategies.
- Futures: Cotton futures are contracts that allow traders to buy or sell cotton at a predetermined price and date in the future. These contracts are primarily traded on commodity exchanges such as the Intercontinental Exchange (ICE). Futures contracts are commonly used for hedging, a risk management strategy that allows traders to protect themselves from price fluctuations in the cotton market. They can also be used for speculative purposes.
- Options: Cotton options are contracts that give the holder the right, but not the obligation, to buy or sell a specific amount of cotton at a predetermined price and time in the future. They provide traders with the flexibility to limit their potential losses to the premium paid for the option.
Comparing Cotton Trading Brokers
- Fees: Compare the fees charged, including spreads, commissions, and any payment fees. Pepperstone, for example, offers cotton CFDs with a 0.16 minimum spread, 1:50 leverage, and a contract size of 10,000 lbs.
- Trading platform: Look for cotton brokers with a user-friendly trading platform that has advanced charting tools and technical indicators. Make sure the platform is stable and fast, and that it can be accessed on different devices, such as your mobile phone via an app. MT4, MT5 and TradingView are popular picks.
- Range of assets: Check the range of cotton contracts and other commodities offered by the broker, as well as other markets such as stocks and forex. This will allow traders to build a diverse portfolio. XTB, for instance, offers 28 commodities (including cotton), plus thousands of stocks CFDs, indices, ETFs, forex, and cryptos.
- Demo account: Beginners should check if the broker provides a demo account or virtual trading environment. This allows traders to practice trading cotton without risking real money. Also, look for educational materials such as webinars, video tutorials, and eBooks.
- UK regulation: Verify that the brokerage is regulated by a reputable authority, such as the FCA. Also ensure that the broker has a strong track record and positive reviews from other traders. Also check for contact number details in case of any issues.
- Additional tools: The best cotton brokers offer expert insights and data into the soft commodity. They will also provide an economic calendar with upcoming events and news that could impact cotton prices.
Cotton Trading Hours
Investors can trade cotton futures on multiple exchanges, such as the Singapore Exchange (SGX), however, the Intercontinental Exchange (ICE) is typically the exchange of choice for UK traders. The trading hours of the ICE for cotton traders are:
- Sunday to Friday: 8:00 PM to 7:00 PM GMT
- Last trading day of the month: 8:00 PM to 3:00 PM GMT on the next day
Bottom Line On Cotton Trading
Cotton trading provides exposure to a volatile soft commodity with widespread applications, including in textiles, homeware and industrials. It can be used to hedge against inflation, speculate on oil prices, and profit from supply and demand imbalances caused by the sale of global stockpiles, for example. Our list of leading cotton brokers offers trading through multiple vehicles, such as CFDs, ETFs, futures, and options.
FAQ
Do I Need To Be Able To Store Cotton If I Want To Trade It?
No, you can trade derivatives of cotton, such as contracts for difference, or CFDs. This means you are not an owner of the cotton so do not have to store it. Instead, you just speculate on whether the price of the commodity will rise or fall.
Can I Trade Cotton On Exchanges Other Than ICE Futures Europe?
Yes, UK residents can also trade cotton futures on other exchanges such as the New York Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE) US. With that said, exchange availability varies between cotton brokers.
What Leverage Is Available On Cotton Trading Products?
Leverage levels depend on the broker and regulator. FCA-regulated brokers, for example, typically offer leverage between 1:10 and 1:50 on cotton CFDs. This includes big names like Pepperstone and AvaTrade. Note, professional traders may be able to trade with leverage up to 1:200.
What Are The Best Cotton Trading Strategies?
Popular cotton trading strategies include trend following, swing trading, and breakout trading. Trend following entails identifying and trading in the same direction as a trend in the price of cotton. Swing trading is about taking advantage of short-term price swings, while breakout trading involves trading on the price movements that occur when the price breaks out of a key level of support or resistance.
Article Sources
Cotton outlook across prices, production, consumption and trade