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Facts and Tips for trading through the Commodity Exchange

Commodity | September 29

A commodity exchange is a place where you can buy hard or soft commodities and sell them for profits. You need to open a trading account with a commodity exchange broker to become a commodity trader. MCX and NCDEX are the leading commodity exchanges in India. They facilitate commodity trading to retail investors through their member commodity exchange trading service providers.

Given below are some facts related to commodities for new traders:

  • In 1848, grain futures were the first contracts that were traded on Chicago Board of Trade.
  • 80% of the world production of Guar Seed is from India of which 70% Guar seeds are produced in the state of Rajasthan itself. 190000 MT of guar gum is exported from India with more than Rs. 1000 crores worth of derivatives at the commodity exchange.
  • Crude oil is the most actively traded commodity in the commodity exchanges in the world. Sweet crude oil tops the futures contract trading of physical commodities in the world, in terms of its volume.
  • Gold is a commodity used for making jewellery, electrical components and others. It is also utilised as an investment asset. Investors at the commodity exchange buy gold for hedging risks because the events that usually impact gold prices negatively also lead to the rise in the price of gold in the market.


How to perform trading in the commodity markets?

Contact a commodity broker who is a member of a commodity exchange, to open a commodity trading account. Not just any broker, but a highly experienced broker is what you need. Reputed commodity exchange brokers have decades of experience. They have in-house experts who have seen the rise and fall of commodity prices over the years.

To gain returns in the commodity market, the trader should have a very good understanding of the market. Your chosen commodity exchange market broker should be able to guide you with the commodity market risks and opportunities in order to make profitable investments.

Once you open an account with a broker for trading in the commodity market, you need to have a disciplined approach to trading. A good place to start would to buy a stable commodity at the commodity exchange. 

Also, you can utilize the high-quality fundamental and technical research reports by experts on the commodity markets. Most of the leading commodity brokers provide exclusive research reports and expert tips to their clients. 

To know more about commodity trading, watch the ehowfinance video on commodity trading for beginner investors-


https://www.youtube.com/watch?v=uJ-Ay6qCgsg

Just like any investment market, you can trade for good profits in the commodities market. You just need to have a trading plan to control and manage losses as per your risk appetite. 

In the commodity exchange market, it is important to understand the risks and control the losses that you make while trading. To do so, firstly understand the risk that you are taking when you get into a contract. Once you enter a contract, place stop loss at a suitable point to avoid suffering from a huge loss. 

A final tip for commodity traders would be to keep a trading records book or excel sheet where you will note each and every move you made as a trader in the market. This book or sheet will help you to plan your trading journey better and eventually, guide you to make better trading decisions.

Interested in trading at a commodity exchange in India? Visit https://www.tradebulls.in/commodity-derivatives or contact the support team at Tradebulls, a trusted commodity trading service provider in India.

Why not continue the discussion on commodity exchanges in India? Post your comments below.

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Aasif Hirani is the Director of Tradebulls Securities (P) Limited. Chartered Accountant (C.A.) by qualification, Mr. Aasif Hirani brings with him over 10 years of rich experience in the finance industry.

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