Indian commodity has long history and it started before in many other countries. Trading in commodity futures is like to trading on stock exchange. Price fluctuations can be volatile depending on type of commodity you deal in stock market. Many opt for commodity trading to diversify their portfolio. Thus you can see prices of commodities.
Any product which comes naturally and serves as an input for secondary market can be described as commodity. They can be divided as agricultural products like cotton, wheat, pepper etc or non-agricultural products like crude oil, gold and copper so on. You can check Basics of Commodity Futures.
Agricultural products are depending on whether condition and their market is more volatile. Non-agricultural products like oil, copper are useful in industries and are preferred by investors. But all commodities are not traded in commodities market.
What is commodity trading?
Commodity trading is an investing strategy wherein goods are traded instead of stocks. Here commodities refer to items defined as per Foreign Currency Regulation Act (FCRA). You can buy and sell the products available in commodity market as you trade in stocks or equity. Commodities traded on value of goods, quality and created in large volumes by different suppliers.
Commodity can be defined either as raw products like corn, species, grains, metals or financial products like Gold, Silver, or currencies. Commodities market can be spot market or derivative market. Spot market means engage buying or selling of particular commodity with immediate delivery. This is done by users and producers.
Commodity Trading Exchanges in India
There are three commodity trading exchanges and you can choose any of those 3 multi commodity trading exchange. There are following three commodity trading exchanges in India. India has 22 commodity exchanges which have been set up under control of Forward Markets Commission.
- National Commodity and Derivative Exchange (NCDEX) (ncdex.com)
- Multi Commodity Exchange (MCX) (mcxindia.com)
- National Multi Commodity Exchange (NMCX) (nmce.com)
All the above three exchanges have electronic trading settlement systems and national presence. MCX located at Mumbai is the sixth largest commodity exchange in world. You will need commodity Demat account from National Securities Depository to trade on NCDEX just like stocks.
List of Commodities
There are common traded commodities include agricultural products. Such as cereals, pulses, cotton, sugar, jute and jute products, spices, coffee, tea, and grains, fuels like crude oil and natural gas.
There are two kinds of goods like hard and soft commodities available in market. Such as Zinc, Coal, Oil and Gold are hard commodities and Soft commodities like wheat, rice, pulses and tea. Thus commodity is tool for creating wealth or an asset.
What is Commodity Market?
Commodity market is a place where commodities trading take place. It is same as equity market but instead of buying or selling shares you buy or sell commodities. Commodities are actual physical goods like corn, soybeans, gold, crude oil, etc.
Most commodities are used to make other products or goods. Like coal is used to electricity, oil is used to run vehicles and wheat is used to make biscuits and other products. Like normal market commodities market is place where buyers and sellers come together to transact commodities for money. For better understand check Benefits of investing in commodity futures.