The history of commodity trading in India dates back centuries and has evolved a great deal from its early beginnings. Trading in commodity futures is similar to trading on the stock exchange. Price fluctuations can be quite volatile depending on the type of commodity you are dealing with, but no more than they are in the stock market. The fluctuations in prices are more than adequately made up for when it reaps returns. Many opt forcommodity trading as a means of diversifying their portfolio.
What is Commodity trading?
Commodities here refer to the items defined as per the Foreign Currency Regulation Act (FCRA). You can buy and sell the products available in the commodity market just as you would trade in stocks or equity. You can pick long or short positions while trading commodity derivatives on the National Commodity and Derivative Exchange (NCDEX) and the Multi-Commodity Exchange (MCX).
List of Commodities
The commonly traded commodities include agricultural products such as cereals, pulses, cotton, sugar, jute and jute products, spices, coffee, tea, and grains, fuels like crude oil and natural gas along
Supply and demand are the deciding factors when it comes to prices in commodity trading. Inventory figures come into play when it is perishable commodities or high demand items like crude oil. Global prices and political instability are crucial in determining whether prices will spike or slump. Climatic conditions can have an impact too.
Some facts Trading in commodities requires a smaller investment because you need to just put up the specified margin amount. The brokerage also can be on par with those in the stock market and forex trading. These factors make it appealing to speculators. Understanding the functioning of the commodities market is quite simple and contrary to popular belief.
One significant benefit of the commodity market is that it encourages price transparency and helps control cartelization while aiding fair price discovery. Commodity trading is for big and small investors alike and once you get the hang of it, reaping profits might become a habit.
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