Like Forex market deals with exchange of Currencies, Stock Market deals with buying and selling of shares of different companies, similarly Commodity Trading deals with trading of Commodities in future.
The one who want to diversify their portfolios beyond investing in shares, mutual funds, bonds, real estates etc. commodities is the best option.
Commodities allow a portfolio to improve overall return at the same level of risk. It has been estimated that commodities increased returns around 130-180 basis points at same risk.
Retail and small investors should be careful while investing in commodities as the swings are very volatile in this market and lack of knowledge can easily loose one's money in this market. One who has good ideal asset than he can think of investing in this market.
Like stock market, commodity market is also driven by demand and supply cycle. Investors should understand the demand-supply cycle and should have a view on what factors affect them. You should always invest in commodities that you can analyze rather than speculate across products that you have no idea.
Commodities means all types of products. On a broader view commodity market is the market where raw or primary products are exchanged. Commodities means all types of products like gold, silver, crude, agri products such as pulses, grains, spices, oils, mentha oils, metals etc.
Commodity market have different exchange where trading is done. You have basically three options:-
Retail and small investors should be careful while investing in commodities as the swings are very volatile in this market and lack of knowledge can easily loose one's money in this market. One who has good ideal asset than he can think of investing in this market.
Like stock market, commodity market is also driven by demand and supply cycle. Investors should understand the demand-supply cycle and should have a view on what factors affect them. You should always invest in commodities that you can analyze rather than speculate across products that you have no idea.
Commodities means all types of products. On a broader view commodity market is the market where raw or primary products are exchanged. Commodities means all types of products like gold, silver, crude, agri products such as pulses, grains, spices, oils, mentha oils, metals etc.
Commodity market have different exchange where trading is done. You have basically three options:-
- The National Commodity and Derivative Exchange (NCDEX)
- The Multi Commodity Exchange of India Ltd (MCX) and
- The National Multi Commodity Exchange of India Ltd (NMCE)
The exchanges are regulated by the Forward Markets Commission (FMC).
Unlike the equity markets, brokers don't need to register themselves with the regulatory body. Only in case of some foul practices are suspected than FMC deals with it.
Now the question arises how to start commodity trading? Like equity market you have to fulfill some customer norms before starting trading in commodities. You need to have a bank account and a separate commodity demat account from the National Securities Depository to trade on NCDEX just like in stocks.
After having demat account you will need to have a broker. Commodity brokers are separate from those of stock brokers. Though now many stock brokers have also sought membership with NCDEX and MCX hence now they can also help to trade in commodities. Besides you will need to give your details such as PAN no., bank account no, etc.
Some brokers who are both stock and commodity brokers include sharekhan, ICICIdirect, ISJ Securities, Sunidhi Consultancy etc. Commodity trading can also be done directly through Internet just as like equity trading. You can get a list of more members from the respective exchanges and decide upon the broker you want to choose from.
As I told you earlier also, that commodity trading is done in future just like future trading in equity market. The major difference in these two is that the information availability of supply and demand is not as robust and controlled as of equity market.
Like any market the demand-supply equation influences the price. Same applies to commodity market. It is also driven by the same supply and demand cycle.
The main difference between the commodity market and the stock market is based on the type of product traded. Commodity trading is done in two ways:-
- Directional Trading
- Day Trading
Directional Trading
Agricultural production is highly unpredictable and seasonal. During harvesting season supply goes up hence prices of commodities comes down. There are traders who use to trade using these patterns in the commodity market. Such trading is termed as Directional trading.
Day Trading
Day Trading
It is as similar to the stock market day trading. Here the positions are bought in the morning and squared off at the end of the day.
You need to keep yourself update to earn good money. The easiest way for doing so is the daily financial newspaper. Daily prices of commodities and the news related to agricultural and perishable products is also there in detail. Brokers research and analysts report is also sometimes mentioned.
You need to keep yourself update to earn good money. The easiest way for doing so is the daily financial newspaper. Daily prices of commodities and the news related to agricultural and perishable products is also there in detail. Brokers research and analysts report is also sometimes mentioned.
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1 comment:
Amazing how simple it can be to communicate with people and have them understand a certain topic, you made my day.
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