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Commodity Trading
Commodity Trading
A commodity is a product having commercial value that can be produced, bought, sold, and consumed. Commodity future is a contract to buy or sell specific commodity, of a specific quality, at a specific price, for a specific future date on the exchange. Commodity trading in India brings a basket full of diverse avenues for investment, away from the traditional avenues of equity, bonds and real estate. Based on the historical data, adding commodities exposure to your existing portfolio helps you increase the returns while lowering the risk. Commodities have very little or negative correlation with other asset classes
Steps to Invest in Commodity Trading
Choose Broker
The broker should be registered and well informed. The broker will execute your trades in the commodity market. Hence you need to be sure about the authenticity of the brokerage company
Deposit Money
Once the account is opened you need to deposit a minimum amount which includes your margin money and maintenance margin. The initial margin range is from 5%-10% of the contract value.
Trading Plan
You now need to come up with a trading plan in consultation with the broker.
Market Info
As an investor, you also need to have access to the information such as market movements, prices on the exchange etc.
Benefits of Commodity Trading
Diversification
A diversified portfolio with a low correlation between its assets tends to have less volatile returns. Thus, investing in commodities ensures diversification and improves risk-adjusted returns.
Inflation protection
Commodities maintain their value and price even during high inflation. In this environment, investors can turn to hard assets such as gold and other precious metals.
Hedge against event risk
Events such as natural disasters, wars, and economic crises can lead to depreciation of an investor’s assets and also lead to a rise in the prices of certain commodities.
Liquidity
Liquidity investment in commodity futures offers high liquidity. It is easy to buy and sell commodity futures. An investor can liquidate his position whenever required.
Trading on lower margin
Investor can take larger positions while investing less capital. This also helps increase the potential for high profits.
High returns
Commodity markets can experience huge swings in prices. Smart investors can take advantage of these price swings to make gains.
Our Trading Platforms
Mobile App
The all new Indiabulls Securities is a discount broking platform offering subscription based plans for unlimited trading.
TradePro Terminal
A comprehensive web-based trading platform with real-time streaming market data, advanced charts, and an elegant design.
PIB EXE
PIB provides the best in the class internet trading features and delivers a seamless and rich online trading experience for its users.
Frequently Asked Questions
- Open an online trading account - To start trading Commodities, you will require to open a trading account. You can easily open your Trading account with Indiabulls Securities within 15 minutes.
- Select an Initial Investment amount: You have to make an initial investment to start trading. The initial margin varies from commodity to commodity.
- Build on a trading strategy: You need to have a plan to start commodity trading. You can make a plan based on the understanding of the market, your trading style, risk appetite, capital availability, etc.