Category: Commodity Market

Impact of Bitcoin on Indian economy

Like any other currency, Bitcoin is also a type of currency, but it is a decentralized cryptocurrency, that is virtual money. It is a system without the central bank or single administrator.

bitcoin indian economy

It has acquired the status of the worldwide payment system. Though, most countries have not given it any legal status to it. Mostly it is used by illegal channels. It was launched in 2009.

Must Read: Top ten day trading secrets for beginners

Bitcoin is supposed to be started by Satoshi Nakamoto. They can be exchanged for other currency, services or products. At present nearly 3 to 6 million people are using cryptocurrency wallet. Most of them are using Bitcoin. If you are interested to earn good money from nifty future tips contact advisor.

Bitcoin is a unit which is further subdivided into millibitcoin (1 millibitcoin = 0.001 Bitcoin) and Satoshi (1 Satoshi = 0.00000001 Bitcoin). Satoshi is the smallest unit in Bitcoin parlance.

All transactions are recorded in a block which acts like the ledger. Once the block is filled, a new block is created. All these blocks are connected to each other by hashtags. A linear sequential record of events of these block forms a blockchain.

It should be noted that though transactions are recorded but the information of the participants in the transaction is not revealed. Hence it becomes impossible to trace both the parties the receiver and giver.

Must Read: Share market tips from experts – why you need it?

First Bitcoin transaction was when programmer Hal Finney received 10 Bitcoins from Nakamoto.

India is technically advanced country. With the use of smartphones, which is spreading rapidly along with the internet availability, information flows is at a faster rate.  Most of the technology startups are interested in Bitcoin because it can be integrated into almost any software and can be monetized.

Bitcoin has tremendous potential and is serving the purpose it was meant to. Transferring money from one party to another, without the worry of rules and regulation of the government and no intermediaries (central bank) to charge commission.

For investment purpose, it is becoming an alternative to gold. Usually called Gold 2.0 It has become an alternative asset class for investors with huge but volatile returns. For more details you can contact stock advisory company.

It has no backing of any government and its value does not depend on the precious metal. All the currency in the world are valued against precious metal, usually gold, and are backed by the concerned government.

Must Read: Why should you invest in blue chip companies?

According to SourceForge, Bitcoins are fast gaining favor in India. Looking at the number of downloads India has moved to 16th rank in the world.

As far as Bitcoin is concerned Indian government is employing wait and watch policy. How developed countries across the globe respond to cryptocurrency. Though Reserve Bank of India has clearly advised general public not to buy or sell virtual currency.

RBI feels Bitcoin will help to circulate black money internationally, as it is very simple to transact without leaving any traces. It is unacceptable and unregulated in Indian financial system.

Must Read: Why is research important in share trading?

Though Bitcoin community is small in India, it wants RBI to step in. They want RBI to create policies to improve the safety of the consumer. The community feels strict guidelines of know your customer (KYC) will help to curb illegal transitions of cryptocurrency.

The community has suggested to the government to set up its own exchange, just like the stock exchange, where all Bitcoin traders can trade, as they trade with other currencies of the world. You can trade with commodity tips.

RBI along with central banks of the world are unable to track economic activities of this cryptocurrency. Hence they are worried about this unpredictable and uncontrolled form. It is impacting banking, finance, and economies of the world. These are the backbone of every country’s progress.

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How to make money from bullion trading?

Traders diversify their portfolio into different asset classes. And diversifying into bullion is one of the easiest to deal and is almost liquid asset class.

money from bullion trading

The success rate depends solely upon the degree to which planning and making strategy are done. It happens just as in any other sector or industries.

  1. What is bullion?

Bullions trading are the word used for trading in gold, silver, platinum, and palladium. They are measured in terms of their weight.

Gold and silver are mostly cast in form of bars. Each bar contains information regarding purity in percentage terms, serial no. weight, and embossing of the manufacturer.

Must Read: What is the Best Way to Invest in Gold in India?

On certain occasions, gold and silver are sold in form of coins. They are also sold in form of grains for general purpose trading.

  1. Working of a bullion market

To make a profit from any trade or from any security, the basic fundamental is to buy low and sell high.

Bullion market also works on the same principle. And commodity market is no exception, and precious metals are supposed to be the best option.

If one scans the movement of the stock market and commodity market, one can see that they move in opposite directions.

That is when commodity markets are high; stock markets tend to be at its low, and vice versa. One can say that they both move more or less in opposite direction of each other.

Must Read: How to start investing for a useful purpose?

Say, when one suffers losses in the stock market, he can cover his losses by opting to invest in the commodity market and vice versa. This way one can control his losses.

  1. Why use bullion coin

Gold and silver are usually called precious metals. Gold and or silver cast in inform of the coin are called bullion coin.  Their value is based on purity and weight of the coin.

Many countries like Canada, US, British, South Africa mint their national coins using gold and or silver, which are used as legal tenders in their country.  They have value in other countries also and get favors in their tax policies.

  1. Investing in different commodity in the marketplace

Most of the people or traders, physically obtain bullion in physical form. It is a sense of security. Many analysts feel that investing in the commodity market is one of the good ideas. But at the same time, they believe in diversifying commodity holding in different precious metals.

One can take bullion trading tips from professionals who after analysis of the market will let you know how much you can expect returns on your investments and in which metals.

Must Read: Proven tips for commodity trading discipline you should follow

That is, some percentage for gold, some for silver, and some for other metals like copper, lead, nickel, zinc.

  1. Where and how can you buy bullion

Bullion like any other commodity are traded in the marketplace. In India, one can obtain precious metals in for of coin from banks or jeweler store. Though one can also obtain them in form of a bar. Which are more discounted because they do not have added cost for making charges?

The government of India from time to time releases gold and silver for traders in the field of precious metals or also in form of gold bonds for the general public.

While buying bullion you should also take into account various taxes that are involved. It differs from country to country. Certain countries offer advantages while buying bullion metals.

  1. Where and how can you sell your bullion

Bullion can be sold at most of the jeweler shops spread across the country. In India, one has to show proof of purchase, while selling bullion.

The required proof can be a cash memo (bill), or certificate when purchased from the bank. This is basically to stop the selling of illegal gold that is procured by theft or other illegal means.

Must Read: Top ten day trading secrets for beginners

While selling bullion, one should remember to sell it at such a shop which is transparent in their dealing. That is they give fare price of the gold, have types of equipment to check purity and provide very transparent process.

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Proven tips for commodity trading discipline you should follow

Trading in Commodity derivative was first started with setting up of Bombay Cotton Trade Association Limited in 1875. They first started future trading in cotton. Later on groundnut, cotton seeds and castor seeds were added.

On the same lines, Calcutta Hessian Exchange Limited was set up in 1919, for future trading of Jute in Calcutta (now Kolkata)

Things started evolving and trading in wheat, bullion, potato, too came in the picture. At present, future trading is carried out in vegetable oil seeds, oils, pulses, cereals, metals, energy, fibers, etc.

Proven tips for commodity trading discipline you should follow

The main aspect of commodity derivative trading consists of two aspects. They are money management and research. One has to have a very solid plan taking into consideration both the aspects.

Certain traders give high importance to money management whereas others give more importance to research. To get best results it is seen that both are to be balanced in right proportion. Both are inter-dependent.

We will talk about both aspects. Money management and research. Both should follow in a disciplined manner.

 

Must Read: How to use derivative market for your advantage?

 

  • Money Management

Money management is one of the important aspects of the commodity derivatives trading business.

A) Time interval of trade

The time interval varies from intraday trading (daily) to short-term (two to three days) to medium term (few days) to long-term (few days to a few months).

This is the first step the trader should decide. And plan how long will he be holding the position. He should stick to the plan accordingly.

B) Funds at risk

Amount of risk he is ready to take on each trade depending on his investments. It can be two to three percent or five percent of his investments. Because longer the time duration of trade higher would be the risk and vice versa.

C) Risk to rewards ratio

Everyone knows higher the risk higher will be the rewards and vice versa. But taking calculated risk rewards can be further extended. That is if three trades are successful and one failed one than it is OK. But since commodity market occasional have trend pattern, in that case, the ratio should be 1:1.5

D) Identifying commodities

One should identify in which one wishes to trade in. Commodities which have a daily trading range of two to four percent should consider.

If the daily trading range of commodity is more than four percent than it will be the high-risk commodity. On the other hand, if trading is less than two percent than it is a very idle commodity. Traders usually avoid slow-moving counters.

  •  Research

After money management research is the second most important factor. The output of good research will provide –

A) Entry and exit points

One of the outputs of good research is that it provides a clearly defined entry point. When a trader should enter in the trade and also for how long should hold and when to exit. Both end of the spectrum that is stop loss and target gain should be considered.

B) To trade or not to trade

An experienced trader will not trade all the times. They usually avoid high volatile days. And also low movements days. This is where most of the money is lost, and risk is high.

Discipline on both the aspects that is money management and research, helps the experienced trader make trading a profitable business. Having a trading plan prepared and sticking to it no matter what may come, is the essential key to successful trading business. Though, in the initial stage of trading business, one may not earn sufficient returns. But in long run, he is sure to earn a good profit and that too steadily. As times go by one enriches his experience and chances of earning regular profit increases.

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How to use derivative market for your advantage?

Different countries have different national currencies which have different values at different period of time. To trade internationally there had to be a system how all these things can be accounted for all these differences.

How to use derivative market for your advantage

A derivative is a contract that is used to safeguard or protect impartially the fluctuating exchange rates of goods that are traded internationally. In other words, it is a “security of the price” that is derived from underlying assets between two or more parties. This contract based upon the assets. Underlying assets can be bonds, stocks, currencies, commodities, interest rates, and market indexes.

There are many kinds of derivatives in existence. Depending upon the type, they are a variety of functions and applications.

Lets us understand this with an example. Let us say a farmer (one party) in July (during sowing season) agrees (contract agreement) to sell 1 metric ton of rice (underlying asset commodity) in October (after harvesting season) to a miller (second party) for Rs.32,000/- (price consideration) per metric ton. Current price being Rs.35,000/- per metric ton. Now if by October per metric ton of rice costs Rs. 33,000/- Still the farmer will have to sell at Rs 32,000/- per metric ton. In this case, the farmer was at loss of Rs 1000/- and miller is at a profit of Rs 1000/-. What if October price were Rs. 31,000/- in that case farmer would have made profit and miller would have made a loss by Rs 1000/-.

From the above example, we can conclude that whatever will be the price in open market farmer will get Rs 32,000/- per metric ton and miller too knew that he will buy rice for Rs 32,000/- irrespective of market condition. Both knew their rates in July itself.

Certain types of derivatives are used for hedging against risk on the asset. They can be also used for speculation on the future price of underlying asset.

How can you use derivatives? Futures and options are standardized contracts and can be freely traded on exchanges.

  1. Stocks

One can earn money on stocks which are kept ideal for too long. The advantage of price fluctuation can be taken in this case. Derivative markets allow you to conduct transactions. No need to sell shares physically.

  1. Arbitrage

Taking advantage of the difference in prices in different exchanges is called arbitrage. Benefitting by purchasing low from one exchange and selling at high in another exchange.

  1. Protecting securities

One can protect his securities against fluctuating prices. That is you can hedge your securities against falling market by the products that are offered in derivative markets. They also protect you from the rise in prices if you are purchasing securities.

  1. Risk transfer

This is one of the most important uses of the derivative market. It transfers market risk from non-risk taking investor to risk taking investor. Non-risk taking investors use derivatives to increase their safety, whereas risk taking investor conducts risky business to improve his profit. There are many strategies and products available that help in transferring risk both ways.

Derivative participants, types of derivative contracts, trading in derivative market in another blog.

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Best 5 proven commodity trading tips for beginners

When talking of exchange, stock exchange comes first to everyone’s mind. Place where securities (shares, bonds etc.) are traded.

 

But very few know that commodity exchanges (though in a crude form) existed much before stock markets came into existence. People traded in rare seashells, animals, precious metals, precious stones, pearls, cocoa, soya beans, spices and later on in oil, energy, electronic and electrical equipment, machinery, pharmaceuticals, chemicals, and what not.

commodity trading

Share market deals, more or less with companies producing finished goods, commodity market deals with raw material used to make other products. It can be agricultural like wheat, soya beans, tea, coffee, corn, cotton, sugar etc, can be metals like gold, silver, platinum, palladium, lead, zinc, tin aluminum etc, can be energy like crude oil, natural gas, propane, heating oil, etc. can be livestock and meat like live cattle lean hogs, pork etc, others products are rubber, wool, amber, etc.

 

Every country has its own measurement criterion and different qualities. So things have to be standardized for smooth exchange of business. In a commodity exchange, the unit of trading is a metric ton, bales, bushels, the barrel of oil, troy ounce, kilogram etc and quantity of each commodity is also defined. Currency is mostly US Dollars.

There are many commodities exchanges in the world. Some have merged and some were unable to continue their business. There are few commodities exchanges that deal in few selected commodities, whereas others deal only in one group of a commodity.

Few known commodity exchanges in India are ICEX (Energy, Precious Metals, Base Metals, Agricultural), MCX (Precious Metals, Base Metals, Energy, Agricultural), NCDEX  (Agricultural , Precious Metals, Base Metals, Energy,),  NMCE (Precious Metals, Base Metals, Agricultural), COC (Agricultural), ACE (Agricultural), BOOE (Agricultural), UCX (Agricultural), and  NSEL.

Bases of trading in commodity market.

  1. Investment amount – It should be very clear that commodity trading is a risky business. One can multiply his wealth several times and may also wash out his capital with huge debts. Hence one should be very sure of the amount he is investing (usually 10% of your portfolio)
  2. Brokerage account – You will have to open the brokerage account with any of the brokering firms which deal with the trading of the commodity. You will have to deposit amount in proportion to your trading. Since trading in certain commodities, you have to deposit huge amount because of the minimum trading size of the lot.
  3. Types of commodities you wish to trade – From the above-given commodities you will have to select which types of the commodity you wish to trade in, like agricultural, precious metals, base metals, energy etc.
  4. Portfolio diversification – To reduce the risk it is better to diversify your portfolio holding. Say if agriculture is your portfolio you can diversify into wheat, cotton, sugar etc, as our country’s agriculture and crop pattern are based on monsoon, it is seen that monsoon pattern is very uneven in different parts of the country. So for some commodity, there will be an abundance of stock which in turn will be least profitable and vice versa. One should rebalance his portfolio from time to time especially depending on monsoon conditions during that year.
  5. Other methods – One also can go in for shares of companies which deal in the commodity. But bear in mind that these commodities-related shares will not be in complete relation to rising or fall of the commodity prices over a period of short time. But they will, however, reduce your risk as they will be managed by experts in the commodity field.