In terms of financial markets, commodities are physical goods that are bought, sold and traded in markets, distinct from securities such as stocks and bonds that exist only as financial contracts.

Trading commodities is the exchange of assets based on underlying physical commodities, typically futures contracts. With the buying or selling of these futures contracts, investors make bets on the expected future value of a given commodity.

Commodities markets allow producers and consumers of commodity products to gain access to them in a centralized and liquid marketplace. The most common way to trade commodities is to buy and sell contracts on a futures exchange. The way this works is you enter into an agreement with another investor based on the future price of a commodity.