Basics of Commodity Trading in India

What is a commodity?

A commodity is a group of assets/goods whether they are related to metal, energy, food or shelter are an important part of everyday life, but these are alternate and exchangeable by nature. It can be categorized as kind of movable goods that can be bought and sold, except for actionable claims and cash.

Commodity trading in India began path back even before it began in numerous different nations. Yet, foreign invasions, ruling, natural calamities, countless government policies, and their amendments were major reasons for the diminishing of commodity trading. Today, however, there are different types of stock market/share market trades; commodity trading regained its importance.

Where to invest in commodities?

There are six major commodity-trading exchanges in India. They are:

• Multi Commodity Exchange – MCX

• National Commodity and Derivatives Exchange – NCDEX

• National Multi Commodity Exchange – NMCE

• Indian Commodity Exchange – ICEX

• Ace Derivatives Exchange – ACE

• The Universal Commodity Exchange – UCX

• In 2015, the administrative body of the commodities trading – Forward Market Commission (FMC) converged with Securities and Exchange Board of India (SEBI). Commodity trading these trades requires standard understandings according to the directions so exchanges can be executed. Commodities are classified into four types.

  • Metals – Silver, Gold, Platinum, and Copper
  • Energy – Crude oil, Natural gas, fuel, and warming oil
  • Agriculture – Corn, Beans, Rice, Wheat, and so forth.
  • Livestock and Meat – Eggs, Pork, Cattle, and so forth

How to invest in commodities?

The most ideal way to invest in commodities is through a futures contract, which is a contract to buy or sell a specific quantity of commodity at an estimated price in future time. Futures are available on each category of commodity. Traders use these contracts as a precaution towards the risks associated with the price swing of a futures trade of good or raw material. Trading in commodities indulge high risk for investors.

More than 100+ commodities are exchanged in the commodity futures market. Out of these, 50+ commodities are effectively exchanged via bullion, metals, agricultural commodities, energy products, etc.

How to choose a commodity broker?

Choosing a right commodity broker is a very important part of the investment experience. Vast scope of commodity trading in India has brought jobs to many brokers.

Though, credibility and experience mark the impression of a good commodity broker. Every investor should do through filtration while searching for a broker. Charges, a broker imposes on his customers may vary from place to place. Choose a broker wisely depending on the basis of offers and fee waivers. Comparing a broker on the basis of the charges may go wrong at times.

Before signing up with your broker, Investor should go past by all the platforms or media through which all the investments are going live. A demonstration of all the application or media is must for investors.

A broker with strong and proactive client base is highly recognized in the market. Relying completely on a broker without any market research might put the investor into losses. Investor should select a right certified commodities broker and understand the process of depositing with a margin so as to complete the transactions.

These are some of the commodity trading basics you need to know to trade in India for more help you can contact financial services companies near you who can properly guide you properly on commodity trading.

A financial advisor with vast experience in the investment and financial domain. I share my options based on research and analysis.