Trading tips

Commodity trading is a centuries old phenomenon which witnessed a facelift in the past one decade. Earlier commodity trading in India was simply limited to the periphery of illiterate and rustic traders dominating the rural India who were a symbol of muscle power governing the agricultural state of India. However with the passage of time commodity trading got popular in west and was redefined as an alternative mode of trading, it got a face lift and witnessed the entry of educated and literate men in the realm of this format of trading. Now even in India commodity trading has taken a very sophisticated and systematic approach followed by sound governing principals and regulatory bodies controlling the actions and sentiments of the commodity market.

Tips of Commodity trading

1. 1. Understand the basic nature of commodity market.

Before entering into this market it is very important for any trader to understand its basic features and characteristics. Those investors who have experience working with equity markets may find commodity markets a bit difficult to comprehend. But once the basic concepts of demand and supply are made clear, commodity trading reaches a comfortable level. Thus before experimenting with commodity markets it is very essential to completely be familiar with its fundamental attributes.

1. 2. Information Pool.

Similar to other trading markets, commodity trading market works phenomenally well, once the information is pooled and gathered from primary as well as secondary sources. The market mediates between both the parties i.e. the buyers and the sellers and provides ample information as to facilitate decision making in terms of appropriate

1. 3. Select the appropriate Commodity exchange.

To initiate a pleasant experience in commodity trading it is very important to rationally select the exchange through which commodity trading is to be undertaken. There are three fundamental exchanges in India, where one needs to register and open an account to proceed with commodity trading. There are three alternatives of commodity exchange from which one can be selected. These three exchanges are, National Commodity and Derivative Exchange, the Multi Commodity Exchange of India Ltd and the National Multi Commodity Exchange of India Ltd. All three have electronic trading and settlement systems and a national presence.

1. 4. Select the appropriate broker.

It is very important to note that before venturing into commodity trading, one should be very careful in selecting the broker. The broker should have a successful track record, and complete knowledge of commodity markets. The established brokers are active members of NCDEX and MCX. These brokers provide lot of support and thus should be selected on discreet terms.

1. 5. Minimum amount required to invest in commodity market.

It is always advisable to start the process with low stakes. As the format of trading would be comparatively newer it is always better to investment not more than Rs 5000 in commodity trading and learn the basic nuances of margin payments to the brokers. This margin ranges from only ten to fifteen percent of the total value of the commodity contract.

Thus by following these simple tips one can assure a very positive and steady returns form the commodity trading. Though it may be a bit complicated to understand in the beginning, but gradually one learns the entire process and secures expertise over the time.