General Basic Information Of Commodity Trading

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What is a commodity?

A commodity is a goods having saleable value that can be shaped, sold, bought and consumed.  Commodity items may be natural or artificial and the commodity market is a program where all raw or major products are swapped. All the new commodities are operated on regulated commodities exchanges, these exchanges provides special protocols to perform best trading wave, and commodity trading is the largest trading segment which speared out all o’er the globe. Commodity trading is mostly for long term. A perfect Commodity Tips provide huge profits if traders have proper knowledge for giving this. Before start trading you should clear in which segment you want to trade after that a deep research about that segment, and then action.

Commodities Trading – It is like trading to stock trading, but instead of business deal in shares of companies, traders buy and sell in commodity goods. Many agricultural products and metal products are carried in commodity trading. Similar to stocks, commodities are operated on exchanges where all the buyers and vendors can trade together to either hold the goods or to create an income from the variable value.

What is a Derivative contract & Commodity future?

A derivative agreement is an enforceable contract whose assessment is derived from the value of an underlying asset; although the underlying asset can be a precious metal, commodity, bond, currency, stock, or, commodity indices, funds and so on there are most4 derivative tools are futures, options, forwards, and swaps/spreads.

Commodity future is another sort of contract to trade specific commodity on a specific quality at a definite price, for a definite future date of the required exchange.

Commodity Type: – Basically commodity products are separated in three categories Energy, Soft and Hard Commodities, here below, we are showing in details all the commodity types

Energy products: – This category contains mainly natural gas and crude oil. Crude oil is a big part in energy commodity trading. Recently, coal and oil were the main common fuel in the USA. These fuels are responsible for polluting the environment. Nowadays, many politicians and businesspeople considered that natural gas is the long-term solution to entire the world energy needs. Moreover the volatile gas is the commodity is single of the most volatile commodities that trade, in terms of cost. However, natural gas is an effective fossil fuel- more proficient and cleaner than several other fossil fuels.

Crude oil is advanced into goods that we employ every day. Refinement of crude will convert into other merchandise such as heating oil, diesel fuel, and some other commodities such as asphalt and petroleum jelly. Converting crude oil into oil goods by breaking up the oil at a factory requires catalysts. A special term crack spread is mainly the cost differential between crude oil, refined products and petroleum.

Hard Commodity: – Precious metal like as platinum, gold and silver are of these categories. PGM (Platinum Group Metal) is the latest metals which found on dry land. It takes in two subgroups of Palladium Group-Platinum Group Elements and Iridium Group-Platinum Group Elements. PGMs have tremendous catalytic qualities. Overall annual mine contributes of platinum is roughly 250 metric tons. The major states of platinum production in the world are South Africa and Russia.  In the USA, there is a minor production of platinum; Canada and Zimbabwe are the second last counties in platinum production. .

 Gold and silver are the most precious metals. The Federal Reserve signifies that it would end asset buy in October. Interest rates play a very important role in the commodity gold silver market. Low interest rates suggest a positive situation for gold and Ag.

Soft Commodities: – Soft commodities are cotton, coffee, Cocoa, Sugar, corn and fruit. Soft commodities play a most important role in the futures market. All the Formers desire to confine the future price of the product by profitable buy of the crop, and by exploratory investors seeking a return Sometimes the term soft is constrained to commodities which are recognized as mainly tropical, such as coffee, sugar, and cotton.

What is long and short position?

A long position is simply a net bought position. The expert uses this position with great attempt. On the other hand short position is just net sold position. For better trading expert use all possible tools, because trading is very risky business, if you have not proper knowledge, then you can drop huge money, knowledge is the key of success so that every trader need collect more and more knowledge about the market and lean skill for applying their knowledge.

What are spot market and the futures market?

When commodities are traded physically on negotiable basis and processed for delivery then this market is known as a spot market, in this market commodity are exchanged in front of traders. On the other hand, when Commodity products are traded irrespective of the physical ownership of the underlying commodity, then this market is called future market. The future market is standard market and trading with this market by contractual contract of the underlying asset with definite quality, and manner of delivery whose settlement is assured by commodity exchanges.

What is a main Commodity Exchange?

In Commodity market, commodity exchange is an association which regulates future commodity trading and registered with FMC (Forward Market Commission). These types of exchanges make many rules and regulation, because of these rules process of trading perform with great liabilities and securities. It works as a board of commodity trading. Every trader and broker always follow all the rules of this exchange. There are two main national level commodities exchanges are available which are MCX (Multi Commodities Exchange of India), NCDEX (National Commodities and Derivatives Exchange of India). Commodity trading is also divided according to these exchanges, when a trader performs trade in gold, silver and other metallic commodities then these types of trading called MCX trading and its tips  is also known as MCX Tips. On the other hand, when trader perform trading in agriculture products like as wheat, rice, cotton, Soyabean and Channa etc., Then these types of commodity trading are called NCDEX Trading and its tips is also known as NCDEX Tips.

What is the meaning of a lot Size?

It is the quantity or strength of a commodity which is specified in the agreement as tradable item. Maximum numbers of commodities in a lot are lot size. The lot sizes are different for different commodities. Lot size always defines before agreement. The details and necessary information about lot sizes, its delivery can be taken from the relevant exchanges or website.

Each agreement has a specific lot size and a specific delivery size, which are not the equal; in the gold trading, the lot size of gold on the NCDEX is about 100 cm whereas the delivery size is about 1000 cm. If a trader enters into a delivery agreement for gold, he will have to enter into 10 contracts or multiples thereof. Market contestants are mandatory to negotiate only the quantity and price of the agreement, as all other limits are set by the exchange.


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