Useful Commodity Trading Tips
In the stock market, there is pretty much a lot of sectors that you can invest in. There is the Commodities market that involves the trade of precious metals as well as agricultural products as well.
Since it is part of a sector where every country in the world partakes in, it is one of the liveliest industries in the stock market.
There are actually commodity market types in the stock market: The Spot Market where the sale of the commodities happens immediately and there is also the Derivatives Market where the sale happens at a much later date.
In India, there are actually six commodity markets. They are the National Commodity and Derivative Exchange (NCDEX), The ACE Derivatives Exchange, the Multi Commodity Exchange of India Ltd (MCX), the Indian Commodity Exchange (ICEX), and the National Multi-Commodity Exchange (NMCE).
Different Types of Commodities
There are actually two basic types of commodities as the commodity options that are being traded in the commodities market. These are:
- Soft Commodity- Any agricultural products
- Hard Commodity- Any precious metals or natural resources other than Agricultural products.
1. Study How the Market Operates
This is considered as basic knowledge and if you learn how the stock market moves, then it will be much easier for you to earn profits.
A lot of traders are not actually learning more about the stocks they’re acquiring. These people just follow the crowd without doing their own research and they end up losing their asset’s value in the process.
Making sure that you make suitable trades is the only way for you to earn big bucks in trading in the stock market.
2. Choosing the Right Broker
A stockbroker is the one who will initiate the trades for you. Although everything can be done online, there is no denying that one would still need the help of a stockbroker.
A good broker will offer you some insight and information on what the stocks that are in demand in a given time frame.
When looking for a broker, you have to look at the price as well as a portfolio so that you will know that every Rupee spent is going to be worthwhile.
3. Invest Slowly but Surely
Intraday or Day trading is one of the most popular types of trading. However, as a beginner, I advise against it. There are just way too many risks involved that can ruin a beginner trader’s career.
Start slowly at first and then gradually increase the number of stocks you’re trading. Slow and steady wins the race, as they say.
4. Diversify Your Investment Portfolio
There are plenty of commodities out there so it is best that you diversify your portfolio. The commodities market is one of the biggest in the stock market which means that the prices are so volatile, that you want to hedge your assets against possible market downturns.
Getting hard and soft commodity shares will ensure that if one industry fails, you still have some shares to fall back to.