How to trade & invest in canola for beginners 2024

Learn how to make your first canola investment and get practical tips for both short-term canola trading, and how to invest in canola long-term.
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Updated: Mar 14, 2024
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In this guide, we explore the foundational aspects of canola investments, from the factors that drive canola prices to the various investment vehicles available, such as spot markets, futures contracts, stocks of canola companies, and exchange-traded funds (ETFs).

Can I invest in canola?

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Yes, investing in Canola is straightforward and available to anyone using an online trading platform. Investing in canola and trading canola represent different approaches with varying time horizons. 

Canola investing involves a long-term perspective with the main aim of growth and diversification. Canola trading, on the other hand, focuses on short-term price movements for quick gains. 

You can invest or trade canola through many different avenues, including physical ownership, canola exchange traded funds, or CFDs. To decide on the best approach, you will need to consider your goals and time horizon before aligning your strategy with your specific objectives. 

Where can I trade canola online?

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Before you invest in canola you’ll need to register with an online broker. Our experts have selected some of the top canola trading platforms. Check out any of the links below to get started in just a few minutes.

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1
Min. Deposit
$ 100
Best offer
User Score
9.9
0% Commission et 0%
Plateforme primée
Plus de 11 méthodes de paiement, y compris PayPal
Start Trading
Payment Methods:
Bank Transfer, Debit Card, neteller, Credit Card, Wire Transfer, Sofort, Visa, Mastercard, American Express, Klarna, POLi, Przelewy24, Rapid Transfer, Trustly, Apple Pay, Google Pay, Discover, Maestro Master, Electron, Bank Transfer: SEPA, iDeal, Checkout, eToro Money, Payabl, Przelewy 24, ZotaPay, Worldpay, skrill
Full Regulations:
ASIC, CySEC, FCA

eToro offers real assets only, no CFD products. Securities trading offered by eToro USA Securities, Inc. (“the BD”), member of FINRA and SIPC. Cryptocurrency offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk, and content is provided for educational purposes only, does not imply a recommendation, and is not a guarantee of future performance. Invezz.com is not an affiliate and may be compensated if you access certain products or services offered by the MSB and/or the BD.

2
Min. Deposit
-
Best offer
User Score
9.9
Start Trading
Payment Methods:
PayPal, neteller, Credit Card, Wire Transfer, Cryptocurrencies, skrill
Full Regulations:
ASIC, CySEC, FCA
74-89% of retail CFD accounts lose money
3
Min. Deposit
$ 250
Best offer
User Score
9.8
Start Trading
Payment Methods:
Bank Transfer, Debit Card, PayPal, Credit Card
Full Regulations:
ASIC, FCA, FINMA, is a licensed bank (IG Bank in Switzerland)

What is canola investing?

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Canola investing gives investors a unique avenue for portfolio diversification and capital growth. As an investment, canola can serve multiple purposes. 

Many investors use canola as a store of value, as a way to hedge against inflation, or for diversification. Canola’s historically low correlation with other assets like stocks and bonds makes it a top choice for investors looking to reduce overall risk. 

Although canola prices can fluctuate in the short term, investors generally focus on the potential for steady and long term growth. This long term focus is what differentiates canola investors from traders. When trading canola, you are more interested in short term price fluctuations than long term performance. Before taking the first step, it’s important to learn how to invest in canola and understand market dynamics. 

What is canola trading?

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Canola trading can take many forms. Speculators, or retail traders capitalise on short term price fluctuations to earn profits. Producers or other entities involved in the canola industry can use trading strategies to hedge against future price changes and ensure safety for their business operations. 

Long term investors look to hold positions for extended periods to profit from canolas future growth. Futures contracts, spot markets, options, and various derivative instruments are standard methods for trading canola. In the following sections, we’ve explained the different ways you can trade canola so you can find the most suitable method. 

Ways to invest in canola

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There are several options available when it comes to investing in canola and the one you should pick depends on your budget, experience, and the timeframe for seeing returns. Here’s a look at the various ways you can invest in canola.

  • Invest in canola stocks. Perhaps the simplest way of gaining exposure to canola is by investing in public companies that are involved in the canola industry. The share price of these companies will correlate somewhat with the price of canola. You will mainly be looking at companies such as manufacturers, producers, and sellers. 
  • Invest in canola ETFs. Exchange traded funds (ETFs) are funds that trade on the stock exchange like any ordinary stock; however, they contain a selection of different stocks, providing a diversified blend for investors. You can also invest in canola commodity ETFs, which are funds that have their value pegged to physical canola. Our guide on the best agriculture ETFs has a selection of funds to invest in. 
  • Invest in canola funds. Mutual funds are created when capital from many different investors is pooled together and a fund manager takes control, using their expertise to decide what canola assets to invest in and when to sell them. This can be a great way of investing in canola without the strain on your own knowledge and experience.
  • Trade canola futures. Futures contracts are the most common way to speculate on short term price changes. They are an agreement to make a trade at a future date for a pre-agreed price. canola futures contracts require a detailed understanding of what impacts short term prices, and are most suited to someone with experience in the market.
  • Trade canola CFDs. Contracts for Difference (CFDs) are a popular way to speculate on canola price movements without having to own the physical asset itself. This makes them ideal for commodity trading, where it’s not practical to own and store large quantities of canola. With CFDs, you can profit from both rising and falling prices. CFDs also offer leverage, which can amplify your exposure to canola markets. 
  • Trade canola options. Options let you buy or sell canola contracts at a predetermined price on or before a specific future date. canola options trading requires some expertise but allows traders to capitalise on price changes and manage risk, which makes it popular with people familiar with the canola market.

How to invest in canola – a step-by-step guide

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Investing in canola is a simple process. Before you begin, you’ll need to register with an online broker to access the canola market. Follow the steps below to learn how to invest in canola. 

Step 1. Define your investment timeline

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You should clarify your investment objectives as the first step. Are you seeking long-term capital growth, portfolio diversification, or short-term speculation? Your investment timeline will influence your canola investment strategy. 

Step 2. Open a canola trading account

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Choose an online broker that offers the canola market. We recommend Plus500 as the best canola trading platform. It has one of the widest selections of derivatives available, so you’ll find multiple ways to invest in canola. 

Step 3. Choose your investment vehicle

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You can invest in canola in many ways. Use our guide above to help you decide which option is most suitable for you. Once you’ve selected, search for your chosen investment using your broker’s search feature. 

Step 4. Analyse the canola market

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Before investing, take the time to analyse the canola market thoroughly. You can look at factors such as supply and demand dynamics, geopolitical events, and technical analysis. You can use your analysis to help develop an investment or trading strategy. 

Step 5. Make your investment

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It’s time to place your trade when you’ve completed your research and defined your strategy. Search for the market you want to invest in and visit its trading page while logging into your brokerage account. 

Check its price and enter your trade details. You can click buy if you’re investing in canola stocks or funds. If you’re trading canola using CFDs or futures, consider including a stop loss and take profit level to help protect your position. 

Step 6. Monitor your investment portfolio

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Regularly review your portfolio and its performance. You may want to consider making changes if necessary and be prepared to adapt your strategy as the canola market conditions adjust. 

Invest in canola

What to consider before making a canola investment

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When investing in canola, it’s important to approach with a well thought out strategy. Considering a range of factors before investing can save you time and money in the long run. Use the helpful tips below to plan your canola trading or investing strategy. 

What are your investment goals?

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Before you begin, you should clearly define your investment objectives. Are you seeking quick gains, long term wealth appreciation, or steady income? Knowing your goals before you start can help guide you in your strategy and also which canola derivative to use. 

Does canola suit your risk tolerance?

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Commodities like canola often experience large price fluctuations due to supply and demand dynamics, global events, and economic changes. Make sure you’re comfortable with the potential for market fluctuations. If you’re a short term trader, then ensure you’ve checked the historical price chart for canola to determine if it’s volatile enough for day trading. 

Will investing in canola add diversification to your portfolio?

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For long term investors, diversification is one of the core principles to follow. When you invest in canola and add it to your portfolio, make sure it complements your existing investments. For example, if you already own several canola stocks, you may be better off choosing another commodity. 

Take the time to study the canola market dynamics. 

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Like many commodities, canola has unique characteristics and supply and demand fundamentals. To trade canola, studying the broader canola market, especially historical price trends is essential. Before you invest in canola, you will need to understand the factors that influence its value. 

Choose the right investment vehicle.

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We’ve already discussed the options available to you to buy canola. Each has its own advantages, so you should select the one most suited to your investment goals. For example, trading canola is best done via futures, options, CFDs, and spot. If you invest in canola, stocks or ETFs are the way to go. 

How does the canola market work?

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The canola market functions similarly to other commodity markets. However, not all commodities move in the same way and canola has a number of unique features that make it independent. Below are some of the key factors at play.

  • Supply and demand. Like all markets, the biggest driver of canola prices is the principle of supply and demand. Many factors impact the supply and demand of canola, including production levels, consumption, and even geopolitical events. 
  • Exchanges. Canola is traded on several exchanges where buyers and sellers transact. The price of canola may be slightly different between exchanges. The main canola exchanges are [exchange 1] and [exchange 2].
  • Hedging. The canola market is often used for hedging purposes. Producers of canola may use futures contracts to protect against future price fluctuations, resulting in stability for their business practices. 
  • Speculators and investors. Retail investors and traders can impact canola prices. This is especially the case for short-term movements, where speculators provide liquidity to the market and impact near-term price dynamics. 
  • Weather conditions. While canola is grown worldwide, a few countries, such as Canada and Australia, are its biggest suppliers. It’s a cool-season crop, so conditions such as drought, extreme heat, or too much rain can impact harvests and its price.
  • Exchange rates. Canola is traded globally, so its price is affected by fluctuations in exchange rates. When a country’s currency depreciates relative to other currencies, it becomes cheaper for buyers to purchase goods from that country. This can increase demand and lead to higher prices. 
  • Government policies. Government policy changes can impact the supply and demand for canola. Governments sometimes use tariffs and export or import restrictions to drive growth. These policies can affect the price of canola, especially if they’re from a significant canola-growing country.

Is canola a good investment?

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This really depends on the key supply-demand drivers, the status of the global economy and your own needs and desires as an investor. Canola has many benefits that make it a good choice for investors. Its main advantage is its role in diversification. It also has a low correlation with traditional assets such as stocks and bonds, which means if you include canola in your portfolio, you’ll spread risk and add stability. 

You can also use canola as a hedge against inflation. When inflation rises, the value of canola historically appreciates. The real world use of canola also creates constant demand. However, it’s important to remember that canola investing is not totally risk-free. Most notably, its perceived health benefits are continuing to be debunked, which may not bode well for the commodity. 

A wide range of factors influences its price, so you’ll need to have a solid understanding of market dynamics before investing. 

What are the risks of trading canola?

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Trading canola has the potential for significant rewards but also carries risks you need to be aware of. These risks are the same across the overall commodity market, but for canola, several more specific ones apply. Below, we’ve explained the main risks of canola investing.

  • Volatility. The canola market is known for its price volatility. Compared to other markets, the price of canola can widely fluctuate daily. It can be costly if you’re unprepared for the volatile nature of the canola market. 
  • Macroeconomic factors. canola prices are affected by several macroeconomic factors, such as industrial demand, inflation, interest rates, dollar strength, and geopolitics. Before trading canola, you should have a good understanding of these. 
  • Canola has no yield. Unlike with other investments such as bonds or dividend stocks, canola does not provide any income yield. So, any returns you make rely entirely on its value increasing over time. You may encounter long periods of flat prices that can reduce your profits. 
  • Low liquidity. In general, commodity markets have less liquidity than more mainstream assets like stocks or currencies. Low liquidity can be problematic, especially if you’re a trader, as you may have wide bid-ask spreads, which could impact the ability to enter or exit positions. 
  • Regulatory risks. Government policies can play a role in the way canola prices move. Export restrictions or changes in tax regulations could introduce unforeseen risks. 

Bottom line

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Canola investing offers the opportunity for diversification and portfolio growth. Canola has potential benefits as a store of value and hedge against inflation, but it’s essential to weigh the risks such as price volatility and market uncertainty before investing. 

One of the key benefits of the canola industry is the various ways you can get involved. There is an investment vehicle for everyone, from canola stocks and ETFs for long term investors to canola futures and CFDs for short term traders. A trusted and regulated trading platform is a must if you want to navigate the canola industry successfully. 

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FAQs

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James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.
Prash Raval
Financial Writer
Prash is a financial writer for Invezz covering FX, the stock market and investing. For over a decade he has traded spot FX full time while... read more.