There are two major markets in India – stock market and commodity market. Commodity market help you invest more amount and earn more profit than the stock market. India has a big agricultural market because of which commodity market has become a large market in India. Agricultural commodities, crude oil, silver, gold and metals are traded through brokerage firms.
The commodities traded in the stock market are approved by the Forward Markets Commission (FMC), a statutory body, which is headquartered at Mumbai. It is a regulatory authority and is overseen by the Public Distribution and the Ministry of Consumer Affairs, Government of India. This authority was set up in 1953 under the Forward Contracts Act, 1952.
Foreign rule, periods of scarcity, Government policy and years of foreign rule caused the commodity market to take a back seat in India. But now, this market has restarted in India and with a boom. Today, India has four national commodity exchanges which are as follows:
- Multi Commodity Exchange (MCX)
- National Commodity and Derivatives Exchange (NCDEX)
- Indian Commodity Exchange (ICEX)
- National Multi-Commodity Exchange (NMCE)
How to trade in Commodities Market?
- To trade in commodities, you need to contact a brokerage firm in order to open a demo account for trading. A demo account, as the name applies, provides you with an opportunity to trade by trial without placing your money under risk. Though the account is real, the money in it is not real.
- You can learn a lot about trading in commodities by reading books and financial publications. There are several books on this subject and you will also find both, weekly and daily, financial publications. The Economic Times, Business Line, Business Standard and Financial Express are some of the financial publications that involve in analyzing the commodities market in this country.
- After opening a demo account, you need to contact a brokerage firm to open an active trading account. But before opening the account, make sure you have your PAN number and some identification proof like documents and a photo.
- An account in bank is also required in order to withdraw and deposit your money from your active commodities trading account. There is a minimum requirement of deposit of Rs.5000 in your bank account in order to initiate trading.
- After fulfilling all these requirements, you can start trading in the commodities. While trading, you might lose some money but you have to learn from your mistakes.
Some Tips to Trade in Commodities Market
Before you trade in Commodities market, you need some important trading tips:
- You must have all information and knowledge about the commodities market. You should understand and know the two major parts of commodity market – MCX and NCDEX.
- You must know how to create a trading account with a reputed brokerage firm. Then you should know all about the commodities that are included in the commodities market. Some of the commodities that are traded are metals, crude oil, silver, gold, natural gas, etc. You also need to choose the commodity that you want to trade in.
- After selecting your commodities that you want to trade in, you will have three to six contracts that will expire or invalid after a certain point of time. Then, you need to decide and set an order to purchase or sell the commodities. Every commodity has a specific margin price by the exchanges that you must pay for your trading. This margin price can change depending on the nature of the market.
- Normally, when the market becomes speculative, a change in the margin value takes place.
- Always keep alert so that you don’t miss any information related to commodities market. Some information can be very beneficial for your investment and you can earn more profits. Before making any significant move, keep your ears and eyes open for any change in the market. The best way is not to invest all your money on any one commodity. Diversify your investment in the sense that invests in several commodities. This will help you play safe in the commodities market.
- Commodity Trading is best for those people who are well informed and patient. While trading in the commodities market, try not to over invest and don’t let your greed take over. By having patience and control over your activities, you can save yourself from the risk that any investment includes.