Commodity Trading

With over 10 products that are offered in the country, it can be difficult to choose the most appropriate commodities for trading. For this purpose, the parameters like liquidity and volatility are considered. Crude Oil is the best commodity for trading in India followed by Gold. Such products boast diversity and growth along with rising demand over the years. The trading can be facilitated by the futures as well as spot contracts.

The MCX or Multi Commodity Exchange provides the option to trade in the array of products namely: Metal - Aluminium, Copper, Lead, Nickel, Zinc, Brass Bullion - Gold, Gold Mini, Gold Guinea, Gold Petal, Gold Petal, Gold Global, Silver, Silver Mini, Silver Micro, Silver 1000. Agro Commodities - Cardamom, Cotton, Crude Palm Oil, Kapas, Mentha Oil, Castor seed, RBD Palmolien, Black Pepper. Energy - Crude Oil, Natural Gas.

Trading or investing in commodities can be challenging as compared to the stock of a company. This is because commodity trading involves products that are physical in nature. There are four major ways to include commodity in your portfolio. One is buying the commodity in the spot market with cash, two is trading via a commodity futures contract, three buying ETF units of the commodity funds, and fourth investing in the shares of those companies that produce the commodity.

For the past few years, crude oil has been the most profitable commodities. In the year 2019, crude oil was the topmost traded commodity in MCX which accounted for almost 32% of the MCX’s turnover which is equal to a large amount of Rs. 66 lakh crores. The prices of this product are affected by global factors along with political turmoil in the Middle East. As history speaks, there has never been an oversupply which negatively affects the cost of the product.

The commodities rely largely on their demand and supply mechanism due to its tangible nature. Similar to the valuation of any product the economy, the commodities are also priced similarly. The market price displayed in the news is usually the futures price which can be different from the actual spot price. The future price is calculated by adding the storage cost and deducting the benefits yield from that commodity.

Stepping into the world of investing in commodity trading does not require a large capital. You can start with as low as Rs 5000 in which you are required to pay upfront margins to the brokers. Also, the amount depends upon the commodity segment you are interested to trade into. In comparison, the fund requirement for this asset class is lesser as compared to the others.

Commodities markets are extremely famous with traders around the globe as enough opportunities are present because of the high volatility in prices. The trading in these products are much attainable and simple to understand/ The top 5 most traded and popular commodities in the world are the following: Crude Oil Coffee Natural Gas Gold Brent Oil