Commodity Trading: Things to Know About It
Are you an investor who is looking forward to various investment options? Do you want to rule out market volatility at the same time? If you just said – Yes, you can consider commodity trading. Well, commodity trading is an integral part of the financial market, which provides investors with a huge opportunity to make some profit.
In fact, over the last couple of years, a huge number of investors are going for commodity trading. However, before you take the plunge, one should try to know what the commodity market is all about, as well as the risks involved with this market. To learn about the commodity market, new investors can take the help of market analysts or financial advisors working with Shyam Advisory. These expert professionals can completely guide investors to make the right choices for commodity trading.
Interested in commodity trading? It’s a good choice. However, before trading on any type of commodities, it is vital to do some research. At the same time, understanding the commodity market is equally important.
Those who are new to investing might not know that commodity trading can be classified into two types, i.e. the MCX (Multi Commodity Exchange) and the NCDEX (National Commodity Derivative Exchange). However, just like other markets, the commodity market also goes through ups and downs.
Before you go ahead and decide to invest in the commodity market, you should know the basics of commodity trading. With armed knowledge and commodity market tips, investors can make the right investment moves.
What Is Commodity Trading All About?
Commodity Trading is basically trading in commodities via spots and futures, even known as derivatives. A commodity is referred to as raw materials, which is used for consumption. Sometimes, it’s also used for trading. To put it simply, it can be said that commodity, in regards to financial market can refer to buying and selling of the raw materials by individuals and institutions.
To overcome the risks associated with this commodity trading, new investors need to follow some valuable commodity tips, offered by professional people and financial planners from time-to-time. The reason to follow the tips is to become aware of the market.
4 Categories of Commodity Trading
Market analysts working with MCX Advisory rightly points out that commodities are the building blocks of goods as well as services. It is broken into 4 groups in India. They are:
• Agricultural: This category consists of livestock, such as cattle, hogs, etc; industrial crops, like rubber, wool, and so on; and even food crops, such as soybean, cotton, and corn.
• Metals: Base metals and precious metals are included in this category.
• Energy: This category consists of petroleum products, such as gasoline, heating oil, crude oil, and natural gas. It also includes coal, ethanol, uranium, and electricity.
• Environmental: This category consists of carbon emission, certificates like renewable energy, and more.
New investors who are looking forward to diversifying the portfolio should opt for commodity trading. In case, they don’t have any idea about the right way to proceed with commodity trading, seeking professional advice from the experts working in Shyam Advisory is recommended. The professionals can come up with suggestions and tips like NCDEX Soybean tips for trading on Soybean or other commodities.
How Commodity Trading Could Be Done?
Wondering, how you can go ahead with commodity trading? Having this kind of thought is very common for new investors. Well, there is nothing to panic about it. Commodity trading could be done in many ways or manners. They are:
• Multi Commodity Exchange
• National Commodity and Derivatives Exchange
• National Multi Commodity Exchange
• Universal Commodity Exchange
All these exchanges are suitable for commodity trading. Still, an investor needs to know, which option is right for them or their investment portfolio. To guide them in this matter, financial planners and market analysts could be of great help.
What’s The Reason for Trading in Commodities?
It is one of the obvious questions that might strike the mind of new investors. Isn’t it?
Well, investors who are looking forward to diversifying their investment portfolio should go for commodity trading. However, there are other reasons also. Take a look:
Investors who are looking to diversify their portfolio should opt for commodity trading. This offers a great amount of profit.
2. High Return
New investors know that the commodity market is very volatile. Price fluctuation is very common. Only with planned investment, an investor gets higher returns from commodity trading. However, investors should checkout and follow the MCX tips offered by professionals from time-to-time.
3. Inflation Protection
In comparison to stocks, inflation holds a different impact on commodities. On this ground, during the inflation, the worth of money begins to deteriorate. This prompts a decrease in the genuine estimation of monetary resources, such as bonds and stocks. Be that, commodities keep up their cost and value, in any event, during the inflation.
In contrast to other investment options, investment for any commodity derivatives provides a high amount of liquidity. It becomes easy for investors to settle their hold in commodity trading.
5. Hedge Against Risk
New investors who are looking to invest in the MCX sector might need professional MCX tips before making their investment moves. However, one thing that they should know about commodity trading is that in the event of natural disasters or economic crisis, commodities don’t stand at any risk. Unlike stocks or bonds, which get badly affected by the crisis, for commodity trading, it results in the rise in the price of commodities.
6. Trading with Lower Margin
A good news for investors is that the margin that needs to be deposited for commodity trading is just only 5 to 10% of the total value. In short, the margin for commodity trading is much low than the other assets’. There are certain facts that an investor should know before they start investing in the commodity market.
Learning About Spot Price and Future Price
Just following the commodity tips blindly is not a good idea when going for commodity trading. Investors need to know about some basic terms related to commodity. Let’s take a look below.
• Spot Price: The spot price is referred to as the price of the commodity which is going to be on sale on the spot. The price is decided on the spot.
• Future Price: The future price is considered as the quoted price of the commodity for a financial transaction on a future date. For future transactions, this price is used.
Factors to Keep In Mind When Looking For Commodity Trading
Seasoned investors might be well aware of the factors that play a crucial role in commodity trading. But what about new investors who are entering the commodity market for the first time? For them, tracking the commodity market becomes a daunting task. Market analysts can provide accurate tips like NCDEX tips related to commodity trading.
They can guide new investors about the factors which must be kept in mind before going for commodity trading. The factors are:
• Investors need to decide whether they are willing to go for spot trading or want to trade through future contracts. Whatever option they might choose, it must be conveyed to the financial planners and advisors. They will provide a plan accordingly.
• Investors should decide if they want to take the help of professionals like the MCX Advisory team or want to do the commodity trading alone. If you are a new investor, seeking the help of financial experts is always advisable. They can guide investors to make the right investment in commodities.
• Know the right time to buy commodities. The ideal time is when the market is bullish. Similarly, if the market is bearish, it’s time to sell the commodities. Professional market analysts through NCDEX Chana tips can state if an investor should sell the commodity or not.
In case, you are planning to invest in the commodity market, it’s important to follow the commodity tips and suggestions offered by the market experts. This would prevent investors from facing any losses.
Commodity Trading through Futures
As a part of investment opportunity in the commodity market, investors can look forward to commodity trading through futures.
Commodity trading through futures offers a lot of benefits. They are:
1. Simple Pricing
The future pricing of commodities like Chana or Soybean or Cotton is easy to comprehend for the market analysts. After studying the market carefully, analysts can provide valuable NCDEX Soybean tips and guide investors about the right time for investment. At the same point, they can consider the future cost of the commodity, simply by calculating the cost-of-carry along with spot price.
2. High Liquidity
The future markets are very liquid, specifically for the most common traded commodities. Hence, an investor can enter and even exit the commodity market whenever they feel and also with the guidance of professional financial analysts.
A huge number of investors go for forward contracts in order to remain protected and also to manage the risks. In fact, commodity trading through the future is known for reducing the instability on foreign currency exchange.
4. No Time Decay
The value of an asset starts to decline with time. This is very common. However, investors who are looking forward to commodity trading through the future would be surprised to know that with futures they don’t need to struggle with time decay.
Valuable Tips for Traders Looking Forward To Commodity Trading
In commodity trading, investors trade with various commodities, such as crude oil, spices, energy, etc. Well, the fluctuations in the demand and supply affect the commodities. As commodity trading is prone to market ups and downs; hence, before trading on commodities, traders should follow some tips.
• Commodity trading is different from stock market trading. Hence, the approach to commodity trading should be different.
• To reduce risk, it’s better if an investor diversifies his capital into different commodities.
• Commodity trading requires a proper understanding of the trade. Entering the commodity market without knowledge or any commodity market tips is certifiably not a keen move.
Investors and traders can invest in different types of commodities. However, understanding the commodity market and the commodities, before making any investment is mandatory. This is where the financial advisory team working with Shyam Advisory could be very helpful. They can guide investors to understand the commodity market scenario. They will also give valuable advice to investors so that they can make the right investment.
Investors, who are looking forward to protecting their investment from inflation, should go for commodity trading. With commodity trading, guaranteed growth is assured provided all commodity market tips offered by the experts are correctly followed.