Know the Basics of Commodity Trading :) Part 1

Are you comfortable enough to answer these given questions with certain level of confidence and conviction?

For example,

What do you think gold prices will go up further?

Are you sure that crude oil prices are going to fall?

Have you heard that the soya crop this year is bad and will result in soya prices going up?

If you think that your answers and predictions have a good chance of coming true and are willing to bet some money on them, you could try your hand at playing the commodity futures market.

You might have heard about stock future trading quite often.  Lets discuss about commodity futures, now..

The commodity markets have changed a lot from the poky, little hole-in-the-wall trading offices in narrow streets next to crowded markets where traditional dhoti-clad merchants used to trade.

Now India’s boast of 3 major national level commodity exchanges

which are National Commodity and Derivative Exchange(NCDEX),

Multi Commodity Exchange (MCX) and National Multi

Commodity Exchange of India(NMCE).

These brand commodities exchanges have been set up and these are fully computerised.

More and more stock brokers are setting up commodity brokerages as well, and trading volumes in commodity futures is widely predicted to rival the volume of derivative transactions (futures and options) on the stock exchanges.

What’s more, you can also trade online.

Well  first lets talk on the need and importance of commodities trading.

Why commodities trading?

Well, let’s suppose you want to buy gold because you believe that the price of gold will rise.

You could then buy gold ingots, store them, wait for them to go up in price, and then sell them at a profit.

But, you have to be sure that the gold you buy is pure, you have to find a place to store it, you have to provide the security, transport it to vault and other such hassles.

A far better way to invest in gold would be to buy gold futures from the commodities exchange.

Next Blog we would touch upon issues like how can we do commodity trading, what is the process and how it works

Stay Tuned for more and more on this

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