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What is commodity trading

Learn what is commodity trading and how it works

The commodity marketdeals in primary products rather than manufactured products. Commodities can be of two types –soft commodities like tea, sugar etc. and hard commodities like gold and oil, and further broken down into 4 other categories namely Energy, Agriculture, Steel and Livestock. Hence, individual investors and traders have an area where they can participateto extend their portfolios further than just shares, bonds, and real estate. Commodity tradingis the apt choice.

Commodities offer opportunities to be a separate alternative asset class for investors. If you know the demand and supply fundamentals of the market, then the commodity market is easy to understand.

Retail investors need to understand the risks involved with trading commodities before taking a leap. The commodity market has been pretty consistent historically, compared to equity and bonds which provide diversified options to the retailors. The size of the commodity market in India has been significant. Commodities constitute to about 58 percent of the country's GDP of INR 13, 20,730 crores.

How does it all work

With the onset of the three multi-commodity exchanges in the country, retail investors can now trade in commodity futures without having physical stocks.Unlike before, retails investors can trade in the commodity marketwith very little investments as well.

You can take advantages of different exchanges in different markets barring Forex market, and you can pay the margin amount and trade in currency derivativesinstead of the full traded value.

How to start

To start trading online, retail investors need to open an online trading accountand choose their broker.

Several established brokers have memberships with NCDEX and MCX. MCX provides trading online. Therefore,trading mcx online becomes easy once the respective online trading account is opened with the chosen broker. You can get a list of members from the exchanges and decide upon the broker you want to choose.

As a standard practice, you will be introduced to the terms with the broker,the Know Your Client format that exist in equity trading, and the terms and conditions of the exchanges and brokerages respectively.

The minimum required investment ranges between 5 to 10 percent of the value of the commodity contract. It varies from exchange to exchange, but the minimum investment required should be INR 5,000 approximately.

Alice Blue commodity trading account helps you trade in the indian mcx at zero-brokerage on all your trades.

Alice blue commodities helps traders of all needs trade in the indian commodity market.Our zero-brokerage commodity trading account lets you make unlimited transactions at zero brokerage.

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