Commodity Trading in India: There was a time in India when grains, oil, cattle, and other commodities were traded among communities and merchants to meet the daily requirements. In today’s world even though the commodities have changed, the way of doing business is more or less the same. People and countries indulge in trading often to make profits.
However, they don’t exchange commodities but use traditional stocks or other financial instruments. In this article, we are going to take a look at the commodity market in India and the various technicalities it involves. On that note, let’s get started!
What is commodity trading?
Quite similar to stock trading, where one can buy and sell the shares of some companies, commodity trading helps you purchase and sell all the products. Commodities are traded on a few exchanges while traders also aim to profit from some of the changes within the market by simply purchasing and selling all the commodities. Commodity trading can be made simpler with the help of contracts, which happens to be a straightforward option for trading in commodities.
Different kinds of commodities
Metal commodities: Metals such as copper, aluminum, iron, and nickel are used for manufacturing, and construction while silver, platinum as well as gold are used for making jewelry as well as investment purposes too.
Energy commodities: Plenty of energy sources like natural gas and oil play a crucial role in empowering the globe. Most of them are used for transportation purposes in factories, homes, and so on. Some of the other examples also include coal, ethanol, uranium, and electricity.
Agricultural commodities: Many commodities like livestock and crops maintain the food supply chain as well as contribute to industries across the world. Some of the commodities also include soybean, cocoa, sugar, hogs, cattle, and cotton.
Environmental commodities: This could also include renewable energy, carbon emissions, etc. The commodities should also be categorized as soft and hard commodities. These commodities are natural sources that could be extracted from the ground or mined. It could also include gold, oil, copper, etc. Other types are agricultural products like sugar, cotton, and other livestock.
Is commodity trading beneficial in any way?
The answer is yes! Commodity trading gives you the benefit of diversification, protects you against inflation, offers higher returns compared to other assets, allows you to liquidate your position within commodity trading, and take up bigger positions with very less capital. This will increase your potential for bigger investments as well.
So these are the basics that could help you understand how you can start commodity trading. Along with this, it is also vital that you take a look at other factors like risk management strategies along with different contributing elements. Apart from that commodity prices can also at any time change and fluctuate with changes in demand & supply for the consumer as well as manufacturing trends. You could also find a broker who could help foray into the whole commodity and intraday trading sector.