Different types of risk faced by traders in commodity market.

Commodity market is a well diversified market and offers several benefits because of which traders prefers to trade here. Two major exchange of Indian commodity market are MCX and NCDEX. This market is of volatile nature and traders face different risk while trading here. Considering mcx tips of market experts helps to play well and improve returns. Having commodities as a part of portfolio help in diversifying the overall risk but traders needs to be careful while trading in it.

Some common risk faced by commodity market traders are discussed below:

1. Geopolitical risk

Major component of commodity market are base metals, precious metals, agricultural commodities, oils and gas. These commodities are present and produced across the world and its jurisdiction is with different government, international companies and more.As for example to get access of oil present in gulf region different oil companies have to deal with the sovereign countries which have jurisdiction of this oil. Changes in economic and political factors affects the prices here.

2. Risk of speculation

Like stock market traders here also trade with primary goal of earning short term profit by speculating whether prices of commodity will increase or decrease. Therefore be aware of the fact that along with traders speculators also exists. Be extra attentive to market updates and learn about different market participants to safely trade here.

3. Risk of fraud

Although different regulatory bodies like commodity futures trading commission are present chances are you may face risk of fraud. A quality research work helps in avoiding any such type of risk. Always make your trade decisions on the basis of facts and not merely by listening to someone.

4. Price risk

Commodities are highly price volatile and along with domestic factors various global factors are also responsible behind its frequent price fluctuations. Traders often avoids trading here because of it. Learning updates timely by being extra attentive in market and predicting price movements in right direction helps to manage this risk to certain extent.

Trading in commodities can be advantageous only when you learn how to manage these different types of risks as investment is all about managing risk in an efficient manner and earning desired returns. Financial advisory services providers can be consulted to get useful suggestions on commodity market trading tips, mcx trading tips and more as such experts recommendations are given after carefully understanding market conditions. In order to become a successful commodity trader first get familiar with different market terminologies and trading strategies as vague knowledge is not going to help. Plan your trades in advance by studying market conditions and never get involved in trades which are beyond your risk bearing capability. Remember earning less returns is always better than earning negative returns.

I am a financial analyst. I always like to read and explore more about market.