Before going in depth to know about how commodity trading works, let us find out what is commodity trading to clear our concepts right. This would really help to know how commodity trading really works.
What is the commodity market?
A commodity market is a physical or virtual place for buying and selling of commodities, trading raw or primary products to earn the profit.
How does the commodity trading begin?
In ancient civilization wide array of commodities are traded including livestock, agricultural products, seashells, and gold. Although there were not the good source to do commodity trading and the methods were unreliable still commodity trading is considered as the essential business at that time. At that time commodities are served as the wheels of commerce, economic development, taxation for the kingdom’s treasuries etc.
How are commodities distinguished?
The categories of commodity trading include
1. Energy- This category of commodity trading includes crude oil, heating oil, natural gas, and gasoline trading.
2. Metals- The metals like gold, silver etc are traded online.
3. Agricultural- This includes the online trading of corn, soybeans, wheat, rice, cocoa, coffee, cotton, and sugar.
In India, online commodity trading is carried out in energies, metals and agricultural products only. The commodity market is carried out in the future market. The future market is the contract between the seller and the buyer to purchase a commodity at a particular period of time in pre-determined price.
The concept of Commodity Market and Stock Market
The commodity market is just like the other market where the trader buys and sells the commodity in physical or virtual space. The traders can trade commodities at current or future dates.
Commodity trading is also done in futures contact, where the buyers agree to pay the sum of amount to the seller after transaction when the seller delivers the commodity at a pre-defined date in future.
The commodity market is same as stock market but instead of stock shares exchange, in commodity markets different commodities exchange to earn maximum profit. Like in stock anyone can invest in a commodity market. The different number of commodity exchange in India is listed below
1. Multi Commodity exchange (MCX)
2. National Commodities and Derivatives Exchange (NCDEX)
3. National Multi Commodity Exchange.
4. Indian Commodity Exchange.
5. ACE Derivatives Exchange.
6. Universal Commodity Exchange.
Commodity market mostly behaves opposite to stock market, where stock market fluctuates or considers being riskier as compared to the commodity market. Still, if you are planning to invest in the commodity market, you must take help of the company like Gill Broking PVT. LTD, Angel Broking and many others who provide accurate, profitable tips and strategies of fundamental analysis of online commodity market.