What is commodity trading, how do invest in it?
Commodity trading is the act of buying and purchasing a commodity through an exchange. It is a contract of various commodities that are traded online. Through this, we trade in agro products (eg wheat, oil, cotton, soybean) and non-agro products (base metals, gold-silver) etc.
Unlike normal stock trading, commodity trading depends on production, weather and natural repercussions of the resources. All the trading done here is done for the future. On the day of the deal, the trader can liquidate and close his commodity options.
How to start commodity trading?
To start commodity trading, you must have a trading account. Before opening an account for online commodity trading, you must read all the conditions. You have to open a trading account with the same broker who has subscribed to major commodity exchanges like MCX, NCDEX etc.
On the official websites of these exchanges, you will find a list of brokers registered to them. There are several commodity exchanges in India, through which commodity trading takes place. Among these, MCX, NCDEX, NMCE are prominently preferred by most of the top brokers of India.
How to open Commodity trading account?
To open a trading account, you must have PAN card, valid address proof and an active bank account. Brokers charge you some fees for this account. After opening an account, you have to think like a trader, ask as many questions as you have in mind about commodity trading to your broker.
After collecting relevant information from the stock market broker, you should increase your knowledge about commodity trading by reading articles on it. Start with mock trading to learn basics of trading. As you gain knowledge, you can start trading in commodity in few days.
How secure is it to invest in commodity trading?
There are some important basic features that you must know about commodity before investing into a trading account.
What things to understand before you start trading?
Keep these things in mind:
- Before starting a trading in the commodity, it is important to know that it is very risky
- You must have a thorough knowledge about the ecosystem of agro or non-agro product that you are positioning for investment
- You invest after completing basic preparations in commodity trading. Ask broker to clear all the doubts. Do not commit without knowledge.
- The probability to earn more is high in commodity trading. If the trader prepares himself and deal with an established broker, then he can earn lots of money quickly in commodity trading.
You can download stock trading app here.