On India, the commencement of commodity trading in the stock market is slightly different. Commodity trading is advantageous if you are patience, as only a few trades occur in one minute compared with frequent price changes (which blink) in intra-day stock trades.
The cyclic nature of the goods you intend to exchange needs to be understood. Otherwise you can select the most liquid and tradable commodity in every global commodities exchange, like crude oil and natural gas.
WHAT IS COMMODITY TRADING IN INDIA
Commodity trading means, in simple words: buying and selling of commodities (items) in our everyday lives such as coffee, silver, aluminum, cotton, black pepper, gold, zinc, crude oil and natural gas.
Products are not traded physically on the exchange of goods but can only be physically owned if you want to deliver rather than cash.
TYPES OF COMMODITY MARKET IN INDIA
Multi Commodity Exchange (MCX) is India’s largest trade exchange for commodities. In accordance with MCX, the product market is classified as below in four types.
- Bullion Commodity Market: Bullion is the silver or gold bulk kept in bars. You can trade in bullion and profit from price changes instead of owning gold or silver.
- Base Metal Commodity Market: The MCX base metal contracts are aluminium, copper, lead, nickel and zinc. In the Indian Commodity Exchange (ICEX), diamond and steel contracts can be exchanged.
- Energy Products Commodity Market: The trading of commodities enables you to take advantage of the price changes in energy items, such crude oil, natural gas and brent, which otherwise cannot be purchased.
- Agri Commodities Market: The exchange of commodity trading in wheat, maize, paddy, black pepper, cardamon, crude palm, cotton, mentha oil, RBD pamolein, castor, chanoe, coriander, guar gum, turmeric, jeera and others is offered in MCX and national commodity and derivatives exchange (NCDEX).
HOW COMMODITY MARKET WORKS IN INDIA
On Indian commodity exchanges, commodities are rarely sold in physical form. This is because the quality of products, logistical challenges and warehousing problems have to be maintained.
The goods are instead standardised in specific future contracts and options that show the ownership of the commodity. In a way, rather than the tangible goods themselves, you trade in commodity derivatives.
You can, however, choose for the delivery mode to sell the contract if you want underlying physical goods.
In commodities futures or an option contract, commodity trading may occur. The right and responsibility to buy the underlying product at a pre-determined contract price shall be the product future contract.
The commodity options on the other hand are rights without a purchase or sale commitment. The option put is the right to sell and the right to buy options.
Three independent companies – commodities exchange, clearing and distributions members and brokerage house – are part of the function of commodities markets in India.
COMMODITY EXCHANGES IN INDIA 2021
In the following commodity exchanges in India you can currently trade and invest in the market for commodities.
- Multi Commodity Exchange (MCX)
- National Commodity and Derivatives Exchange (NCDEX)
- Indian Commodity Exchange (ICEX)
- National Stock Exchange of India (NSE)
- Bombay Stock Exchange (BSE)
BEST COMMODITY TRADING TIPS IN INDIA 2021
- Select Commodity Which You Understand
- Have Patience & Strategy While Trading Commodities
- Use Margin Carefully
- Always Trade With Stop Loss Order
- Capture Small Price Movements
Trading in commodities is not so tough for people who understand the dangers and are ready to spend time studying the underlying variables.
Commodity markets are only open for the short term in contracts which have fixed expired. If you want to diversify your portfolio with a short-term asset class, then trade in commodities will be yours until late at night.