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Thứ năm, 04 Tháng 3 2010 09:50

Commodity tradings happens in commodity markets. Commodity market is a place where commodities are traded or exchanged under standardized contracts. In a commodity market tradings follow different methods like forward trading, futures trading and spot trading.Commodities trading or Futures trading is considered to be a great way to invest and make money. This is one investment option particularly when the stock markets are volatile.

Commodity Trading, Futures trading

Commodities are traded under different methods. Usually in a commodity market there are spot trading, forward trading and futures trading.

Spot trading Spot trading means that the trading and delivery takes place immediately or there many be a small delay in the delivery due to technical constraints.

Forward contracts is a trading that takes place between a buyer and a seller. It is a contract whereby seller agrees to sell the commodity to the buyer at the present rate on a future date. The trading will be completed on the day specified.

Futures contract Futures contract or trading follows the same routine like the forward contract. The actual transaction of selling or buying will happen at a later date. But the contract here is regulated through an exchange. Futures exchange of the respected countries will execute the contract there by eliminating the fear of non execution of the contract.

Hedging Hedging is another practice that insures against poor harvests. This practice is carried on by cooperatives mainly. They try to reduce the risk of poor harvest by actively participating in the futures market. They take futures contracts and offset the loss they may incur on account of poor harvest.

Commodity Futures trading takes place in commodity exchanges and it has some great advantages. Due to Commodity futures trading poor farmers can afford to make profit and insure themselves against low prices by entering in to a contract to sell at the time the product prices are high. Buyers also benefit from the fluctuating prices at the time of the harvest. Futures also are regulated very well by futures exchanges of the respective countries.

Commodity futures thrive particularly when the stock markets are volatile. That is the co relation between stock markets and gold futures. When stock markets are falling FIIs or Foreign Institutional Investors withdrew their stock market investments and invest is gold and commodities that push the commodity market. It is another advantages of commodity trading. When the stock markets are volatile or crashing you can invest in commodities as you can speculate better in commodities than stock markets.

How to Join Commodity Futures trading

You can join with limited formalities in a futures trading. Formalities to join are similar to Stock market. You are required to open a Dmat account with a Commodity broker or a bank that offers commodity option. You are required to possess a Pan card or Income tax payment no in India before joining Commodities trading. You the Broker charges are very less considering equities market. You have the benefit of Margins here.

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