How to trade & invest in electricity for beginners 2025

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eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.

In this guide, we explore the foundational aspects of electricity investments, from the factors that drive electricity prices to the various investment vehicles available, such as spot markets, futures contracts, stocks of electricity companies, and exchange-traded funds (ETFs).

Can I invest in electricity?

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

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

You can invest or trade electricity through many different avenues, including electricity stocks, electricity 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 electricity online?

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

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eToro

Min. Deposit $100

Fees 1%

No. assets 50+

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eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.

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Plus500

Min. Deposit $100

Fees From 2%

No. assets 2800+

Demo account Yes

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CFD service. 82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

This information is NOT relevant to EU residents who are to be serviced by EU subsidiaries of the Plus500 Group, such as Plus500CY Ltd, authorised by CySEC (Reg. 250/14). Different regulatory requirements apply in Europe such as leverage limitations and bonus restrictions.

BullionVault

Min. Deposit n/a

Fees -

No. assets n/a

Demo account -

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What is electricity investing?

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

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

Although electricity 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 electricity investors from traders. When trading electricity, 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 electricity and understand market dynamics. 

What is electricity trading?

Electricity 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 electricity 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 electricitys future growth. Futures contracts, spot markets, options, and various derivative instruments are standard methods for trading electricity. In the following sections, we’ve explained the different ways you can trade electricity so you can find the most suitable method. 

Ways to invest in electricity

There are several options available when it comes to investing in electricity 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 electricity.

• Invest in electricity stocks. Perhaps the simplest way of gaining exposure to electricity is investing in public companies that are involved in the electricity industry. The share price of these companies will correlate somewhat with the price of electricity. You will mainly be looking at companies such as manufacturers, producers, and sellers. Use our best energy stocks guide to find the top electricity companies to buy in 2025.
• Invest in electricity 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 electricity commodity ETFs, which are funds that have their value pegged to physical electricity. Our guide on the best energy ETFs has a selection of funds to invest in. 
• Invest in electricity 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 electricity assets to invest in and when to sell them. This can be a great way of investing in electricity without the strain on your own knowledge and experience.
• Trade electricity 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. electricity futures contracts require a detailed understanding of what impacts short term prices, and are most suited to someone with experience in the market.
• Trade electricity CFDs. Contracts for Difference (CFDs) are a popular way to speculate on electricity 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 electricity. With CFDs, you can profit from both rising and falling prices. CFDs also offer leverage, which can amplify your exposure to electricity markets. 
• Trade electricity options. Options let you buy or sell electricity contracts at a predetermined price on or before a specific future date. electricity 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 electricity market.

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

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

What to consider before making an electricity investment

When investing in electricity, 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 electricity trading or investing strategy. 

What are your investment goals?

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 electricity derivative to use. 

Does electricity suit your risk tolerance?

Commodities like electricity 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 electricity to determine if it’s volatile enough for day trading. 

Will investing in electricity add diversification to your portfolio?

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

Take the time to study the electricity market dynamics. 

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

Choose the right investment vehicle.

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

How does the electricity market work?

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

• Generation. Electricity is created from various fuel sources like coal, natural gas, nuclear, and hydroelectric dams. Renewable sources like wind, solar, and geothermal also are used to generate electricity. 
• Transmission. Electricity is unlike most commodities and is transported long distances via high-voltage power lines and towers. These towers carry electrical currents hundreds of miles to meet demand. 
• Distribution. Electricity enters homes and businesses after being transformed to lower violates by local wires and substations. Consumer facing power companies handle this section of the electricity lifecycle. 
• Retail pricing. Utility companies charge customers rates per kilowatt hour based on natural rate structures. Retail pricing is often capped by governments and local regulators. 
• Supply and demand. Like all markets, the biggest driver of electricity prices is the principle of supply and demand. Many factors impact the supply and demand of electricity, including production levels, consumption, and even geopolitical events. 
• Exchanges. Electricity is traded on several exchanges where buyers and sellers transact. The price of electricity may be slightly different between exchanges. The main electricity exchanges are NODAL and ICE.
• Hedging. The electricity market is often used for hedging purposes. Producers of electricity 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 electricity prices. This is especially the case for short-term movements, where speculators provide liquidity to the market and impact near-term price dynamics. 

Is electricity a good investment?

This really depends on the key supply-demand drivers, the status of the global economy and your own needs and desires as an investor. electricity 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 electricity in your portfolio, you’ll spread risk and add stability. 

You can also use electricity as a hedge against inflation. When inflation rises, the value of electricity historically appreciates. The real world use of electricity also creates constant demand. However, it’s important to remember that electricity investing is not totally risk-free. 

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 electricity?

Trading electricity 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 electricity, several more specific ones apply. Below, we’ve explained the main risks of electricity investing.

• Volatility. The electricity market is known for its price volatility. Compared to other markets, the price of electricity can widely fluctuate daily. It can be costly if you’re unprepared for the volatile nature of the electricity market. 
• Macroeconomic factors. electricity prices are affected by several macroeconomic factors, such as industrial demand, inflation, interest rates, dollar strength, and geopolitics. Before trading electricity, you should have a good understanding of these. 
• Electricity has no yield. Unlike with other investments such as bonds or dividend stocks, electricity 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 electricity prices move. Export restrictions or changes in tax regulations could introduce unforeseen risks. 

Bottom line

Electricity investing offers the opportunity for diversification and portfolio growth. Electricity 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 electricity industry is the various ways you can get involved. There is an investment vehicle for everyone, from electricity stocks and ETFs for long term investors to electricity futures and CFDs for short term traders. A trusted and regulated trading platform is a must if you want to navigate the electricity industry successfully.