Online commodity trading in India has come a long way and has grown by leaps and bounds over the years. Currently, commodities trading in India spans both hard and soft categories. Hard commodities include metals, crude oil, precious commodities while soft commodities, which have a limited shelf life, include agricultural commodities like wheat, soybean, cotton, corn etc.
Before we proceed further with the platforms on which commodity trading takes place in India, we need to have a look at the types of commodity trading that is most popular in India.
- Types of commodities traded on MCX:
1.Energy: This segment includes crude oil and natural gas.
2. Base metals: This segment includes aluminium, copper, lead nickel, zinc and brass
3. Bullion: Gold & Silver
4. Agricultural commodities: Cardamom, rubber, mentha oil, palmolein, castor seed, black pepper, cotton are included in this segment.
- Most traded commodities:
Gold, corn, crude oil, brent, silver, wheat and coffee are a few of those most traded commodities across the globe. Price movements in a commodity in one part of the world tend to have a ripple effect on the commodity in other geographies.
Consider, for instance, the case of crude oil. While there is increased insistence on renewable energy resources, the world still hasn’t weaned itself away from large-scale dependence on crude oil. Refining crude oil gives us products like petrol and diesel. Throughout history, the prices of crude oil have been affected by the sudden eruptions of wars in the Middle East and other countries.
Gold is another commodity that commands a special position as an investment haven against fiat currencies. Every major crash in equity markets across the globe is often accompanied by a sudden spurt in gold prices. It is considered to be an important hedge to countering a fall in equities.
- Important commodity exchanges in India:
- Indian Commodity Exchange
- Multi Commodity Exchange
- National Commodity and Derivatives Exchange
- National Multi Commodity Exchange of India
Principles to follow while trading in commodities:
- Before one starts trading in commodities, it is necessary to understand the demand-supply dynamic that affects the daily price movement of these commodities.
- Before placing a trade, one must have an idea about the actual demand of the commodity in the local markets. Additionally, if one is trading in commodities like gold, it is necessary to understand that global factors including the yield movement on US Treasury bills also affect gold prices throughout the world.
- The risk in trading in commodities is quite high, so one should carefully study the implications of the leverage he or she is availing of.
Final word:
There are several commodity trading apps in India where one can trade in equities as well as in metals and agro-products. A large community of traders choose to trade with Motilal Oswal as it is one of the best commodity broker in India offering unparalleled services and a hassle-free app interface. Open a commodity trading account online and start commodity trading today.
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