Commodity Trading involves the trading of certain commodities including their derivative products. Commodities are traded through commodity exchanges. Traders can choose to take physical delivery of the commodities or deal in the Futures contract. This is an agreement wherein a fixed quantity of the commodity can be bought or sold within the mentioned expiry date, at an ascertained price. In India, Commodity Trading is possible at exchanges like the Multi Commodity Exchange of India, the National Stock Exchange, the Indian Commodity Exchange, the Bombay Stock Exchange, and the National Commodity and Derivative Exchange.
What is Commodity Trading?
Commodity Trading in India revolves around the trading of commodities and their derivatives like agriculture, metals, energy, etc. Agricultural products involve wheat, rice, soya bean, rubber, etc.; metals include copper, aluminium, precious metals, etc.; and energy involves crude oil, natural gas, etc. A commodity is a raw material basically and trading in these commodities helps traders and investors diversify their asset portfolio. Since it is a type of trading, Commodity Trading involves the buying and selling of these commodities. For beginners, a Contract for Difference or CFD is the best option.
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Benefits
Hedge against inflation
Hedge against the crisis
Portfolio diversification
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Good Chances of Getting Higher Returns
Global infrastructure projects lead to increased demands for commodities, thus impacting their prices, which in turn, has a positive influence on earning higher returns.