Have you ever heard about Commodity trading? People who love the trade may have heard about it. A commodity market is an electronic marketplace where traders can buy, sell and even trade in commodities. You can trade physically and virtually through a stock exchange that entirely depends on you if you want. The commodities that you can trade in the commodity market are- Metal, energy, Agriculture, Livestock, and meat.
In India, the exchanges where you can trade commodities are the Multi Commodity Exchange of India, Indian Commodity Exchange, National Commodities and Derivatives Exchange Limited, and National Multi Commodity Exchange of India. Commodity trading is not new in India; it has a rich history in 1875 when the Bombay Cotton Trade Association was established. If you want to learn more about Commodity trading, you can check this out!!
Why should you do Commodity Trading in India?
One of the best ways to hedge your equity portfolio is Commodity Market. There is a negative relation between the equity and commodity market, which means when there is a rise in the equity market, the commodity market falls and vice-versa. Hence, when you do the commodity market, you can manage the risk in the stock market.
If you want to invest in the commodity market, you can do it in different ways: ETFs, mutual funds, options, futures, and physical commodities. You can consider investing in any way that you want to. But always be attentive while trading because it is not easy!
Significance of the commodity trading market
The commodity market is the exchange platform where participants can discover the actual price of the commodity. It can provide you the importance, and those are mentioned below-
Ease of information
When the person chooses the commodity market, it helps the person easily access the information. You can get all that information via SMS TV Shows; many awareness and training programs are available throughout the country. So when you have the information about that, you will not be able to trade in that easily without much hassle.
Quality of commodities
When you trade in commodities then, you will know that there are many strict rules. When you choose this market, they will provide you with the quality of commodities you can trade on the exchange. Many farmers also pay so much attention that it will help you make things.
Real price discovery
If you use the commodity trading market, it will offer you a transparent platform for the people. It will help the people get easy access and discover actual prices in the market. Earlier the farmer was quickly looted by the corrupt middlemen who used to buy the commodities from the farmers at a cheap rate and sell them at a high rate to the trader. Therefore, it protects the interest of the protected.
If you want to start commodity trading, you need to choose the best platform to trade, which is reliable because then only they can get several benefits.
Benefits of commodity market
Look here to know about some benefits from the commodity market or trading in the commodity market.
Protect from inflation
When there is more demand for goods and services, that will increase the price. It creates an inflationary environment that raises the interest cost of borrowing and even reduces the company’s income. That is why during inflation, the prices of the stock decrease, and the stock market fall apart.
Protect from geopolitical events
Geopolitical events such as riots, war, and conflicts can disrupt the supply chain, resulting in scarcity of resources. It is because that will affect the transportation of the raw material that will affect the supply of the commodity, and there will be a mismatch in the supply and demand of the commodity. When this happens, there will be an increase in the commodity’s price, which will cause a fall in the stock market.
As mentioned above, there is a negative correlation between commodities and stocks. If there is a rise in the commodity market, it will reduce the stock price, leading to inflation. It means people will not be able to buy more goods and services, which will decrease the stock drop that will reflect the reduction. But when the stock rate is stable, that will raise the inflation rate. In addition, the price of the commodities will respond to fundamental factors such as strikes, weather, and other geopolitical instability. So, before you invest, you should check all the prices, which will give you an idea about the different things if you get that idea from stock news.
Commodity trading nowadays is conducted online, making it accessible to all market participants. It is the platform where anyone can conduct any activity, and it will help them discover the actual or fair price. It will even eliminate the risk of manipulation that will help determine the supply and demand, and through that, you can quickly learn about the best time to trade.
The Final Words
Finally, it can be said from the above article that the commodity market can be beneficial for the people in India. It can offer them several benefits if they use them properly and get proper information before trading from stock news online.