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.

Best five Commodity Trading Tips For Beginners

Everyone knows that the commodity market is increasing enormously that’s why traders are starting to enter the trading market. It is really true that the commodity market has determined economies of different first-class countries more than the past few years. Commodity traders require a right strategy of how the best part of traders believe and respond to certain market circumstances.

It is important to know about the commodity trading tips for development of the worldwide financial market. It will helpful for you to make more profits. If you make a decision to invest in the currency trading, commodity or stock trading then it is necessary to know that the production can be unsafe. Thus, there are following some tips for commodity trading that is useful for beginners.

commodity tips

  1. Be Familiar With The Commodity Trading Technical Language

It is important for beginners to know the language that used in commodity trading. The language level is one of the major that is also difficult areas for traders. When you familiar with the language, it provides you lots of knowledge about commodity, commodity tips, increasing number of market concepts and change nature of economic transactions. There are many commodity traders think about this face for their trading achievement.

  1. Select Area Of Specialization

There are many types of commodity trading so you are able to select from your preferred fields according to the commodity trading markets. You need to improve yourself according to trading choices because understanding the inner working market depends on your ability to focus in a particular area of expertise.

  1. Know About How Other Traders Earn

You should be familiar with how your competitors earn from the equivalent market or other markets. It is necessary to find out what others traders earn, what commodities tips that they follow and some other things that can be cost-effective to you. While it pays to use your knowledge and the familiarity of other traders, it is very important to look for the support of commodity discount brokers.

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

  1. Choose the popular commodity exchanges

It is significant for a learner in commodity trading to understand some facts about the well-liked national level exchanges that is available for commodity trading in the India. This can decide which exchanges are suitable for you according to their needs.

  1. Set The Initial Investment Amount

It is essential to decide the right investment strategy for trading. When starting initial business, you don’t have to put all your assets. It is suggested to recognize the market before providing your whole promise. So, you have to decide invest amount and put your convenient funds. Therefore, time and money is an essential stage for the commodity trading. If you do perfect then you get more back.

However, there are several methods and techniques to boost your possibility of success in trading. They are generally referred as plans that are used to accomplish specific goals to enhance the possibility of taking income and limiting loss. Therefore, for people who want to expand their selection away from shares, bonds and actual estate than commodities is the best choice.

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