Try Investing In A Commodity Market

Trading is indeed one of the highest paid services in all over the world. It is such a type of market where transactions of many items take place. Initially when trading centres were opened they started up with only a few selected goods. Now each trading centre trades for varieties of other products. Within a single product classification they have so much to transact, that there is no end to it. With industrialization the commodities being traded have crossed all barriers. Now almost every type of commodity is transacted in exchanges. Commodity market has evolved to a great extent. Things are completely different from what it was a decade ago.

The exchange market consists of two big benchmarks: National commodity and derivative exchange and Multi commodity exchange. Multi commodity exchange or popularly known as MCX deals in billions of energy and metal products. National commodity and derivative exchange, NCDEX allows people to trade in agricultural commodities. Multi commodity exchange of India limited is a public limited company based in Mumbai, India. There are certain principles of operation for these exchange centres. The very first principle says that trading must be done only on standard products. Second principle states that trading will take place through future contracts.

Trading commodities involves risk thus the above principle. The chance to limit the risk comes with experience in this market. As a trader you should always have certain limits. Creating certain limits will help you balance out the losses, if you face any. Time is a very big factor, so wait for the correct time to trade. Do not always keep changing your outlook towards a trade. Same vision can be maintained for a longer duration of time. Select a good consultant who can advise you well over everything. Commodity market has performed sufficiently well in the last few years; good future results are highly anticipated.

Know the Basics Related to Commodity Trading

You would have heard from your friends and relatives speaking commodity trading. You have even heard of people earning through commodity trading. This might have caught the interest of you and this is the case of many people. These days, many people show interests in commodity and the very purpose of this article is tell the basics of commodity trading, Before getting deep into this subject, it is better to know what is a commodity. Commodities are nothing but the goods that are standard in quality and have demand in the market.

Gold is an ideal example of commodity, as its quality does not vary much whether it is mined in Australia or Africa. As the quality of the gold is standard, it becomes a great commodity. Similarly, the quality of the crude oil does not change and hence you can always ensure that you receive good quality product. Some of the other popularity traded commodities are precious metals like copper, silver and gold; agricultural products like rice, rubber, corn and sugar; energy resources like coal and crude oil.

To tell in simple words, trading a commodity refers to buying a commodity at a price on a day and selling it again some days later. If the selling price is higher than buying the price, then you sell the commodity for profit, otherwise you sell at a loss. Commodities are traded using the derivative tools. Future is one of the examples of derivative tool. In futures contract, a person will buy the right to buy/sell the commodity in a specific date in future. Here, you do not actually buy the commodity but only an agreement to buy in a specific date. The price may fluctuate and go up and down until the selling date. If the price of the commodity has increased from the date of buying the contract, then you trading will result in profit.

Commodities are traded between people between different countries. There are various commodity exchanges across the globe to facilitate commodity trading for the individual traders. Some of the popular commodity exchanges in the world are Australian Securities Exchange, Chicago Mercantile Exchange, and the Tokyo Commodity Exchange. These exchanges are the marketplaces, where traders come to sell or buy the futures contract. The price of commodities goes up and down due to various reasons such as economic, monsoon, weather, wars, political etc.

A good commodity trader should be able to guess the price fall/down and make his move accordingly to increase the chances of earning profits.

A Look at Asia Commodity Exchanges

Whenever there is a talk of the commodities in Asia, there are different commodities that are involved such as TOCOM, (Tokyo Commodity Exchange), Sydney Futures Exchange, Oman Crude Oil of the DME (Dubai Mercantile Exchange), MCX (Multi Commodity Exchange) of India, AFET (The Agricultural Futures Exchange of Thailand) and DCE (DaLian Commodity Exchange) in China. Apart from these, there are many other commodities as well. Have you thought or heard of them anytime? You might have thought that Bursa Malaysia trades only the benchmark KLCI (Kuala Lumpur Composite Index), and the equity issues that prevail in the country. But it is the home of FCPO.

In fact, Malaysia is the chief exporter of palm oil contributing around 50 percent of the global production of the commodity. This commodity is used in the shortening of fats among others and in margarine. Also, the palm oil fruit that is the source of palm oil produces palm kernel oil that is non-edible and this is used widely in cosmetics. One unit of palm kernel oil is there in every ten units of the palm oil.

India has a very long history of futures commodity trading. At the time of the American Civil War between 1861 and 1864, the British bought cotton or white gold from the country to feed the looms that were located in Manchester and Lancashire as they could no more buy these commodities from the Americans. Five years after the formation of the Chicago Board of Trade, Bombay Cotton Exchange was established and this happened as early as 1875. Now, the NCDEX (National Commodity & Derivatives Exchange), MCX (Multi-Commodity Exchange of India) and NMCE (National Multi-Commodity Exchange) comprise the mass of commodity exchanges in the country. MCX being the largest commodity exchange in India has 73 products including spices, metals, and grains such as rice, soybeans, and maize that are available for trading.

The NCDEX is the second commodity exchange that provides an equally broad product lineup such as mustard oil and guar seeds. However, it trades many same products as the former. The exchanges will consolidate over time, and we will get to know which one has lower costs, improved price discovery, and increased liquidity. The TGE (Tokyo Grain Exchange) that was founded in 1952 offers future, and also cash settled futures in the agricultural products such as coffee, raw silk, soybean mean, soybeans, corn, Azuki bean, and raw and refined sugar. Thailand is the major producer of rubber globally and they also produce tapioca start premium grade and tapioca chip. It is produced from the cassava plant, and it is the third largest producer of tapioca next to Brazil and Nigeria.