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Online Commodity Trading

Commodity trading 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.

  • Trade in Bullion, Energy, Agro
  • Invest, Trade, Hedge & Speculate
  • Trading on Lower Margins
  • Internationally standardised prices
  • Diversification of portfolio
  • Hedge against risk

What is Commodity Trading?

Commodity trading is a market where the buying and selling of various commodities and their derivative products take place. These commodities are primarily categorized into metals, energy, livestock and meat, and agriculture.

For investors, the MCX commodity market from MCX (Multi Commodity Exchange of India Ltd), one of India's leading national commodity exchanges, offers a way to diversify their portfolios beyond traditional securities.

Commodity market timings are unpredictable as they can be affected by natural and man-made calamities. There are various ways to invest in commodities, such as commodity futures contracts, options, and exchange-traded funds (ETFs).

Types of Commodity Investment

There are approximately fifty major commodity markets worldwide trading in more than 100 commodities. Traders can participate in four major categories of commodities:

Metals:A wide variety of metals such as iron, copper, aluminum, and nickel, which are used in construction and manufacturing, are available for trading in the market. Precious metals like gold, silver, and platinum are also traded.

Energy goods: Energy commodities used in households and industries are traded in bulk. These include natural gas and oil. Other energy commodities that are traded include uranium, ethanol, coal, and electricity.

Agricultural goods: The commodity market offers a wide variety of agricultural and livestock products. Examples include sugar, cocoa, cotton, spices, grains, oilseeds, pulses, eggs, feeder cattle, and more.

Environmental goods: This category includes renewable energy, carbon emissions, and white certificates. Globally, the most-traded commodities include gold, silver, crude oil, Brent oil, natural gas, soybeans, cotton, wheat, corn, and coffee.

How to Invest in Commodity?

Investing in commodities can be done through various methods, each with its own level of complexity and risk. Here's a general overview of how to invest in commodities:

Futures and Options Contracts:

Futures Contracts: These allow you to buy or sell a specific quantity of a commodity at a predetermined price and date in the future. Futures trading often requires a substantial initial margin and carries a higher level of risk.

Options Contracts: Options provide the right, but not the obligation, to buy or sell a commodity at a specified price within a certain time frame. Options can be used for hedging or speculation.

Exchange-Traded Funds (ETFs):
Commodity ETFs track the performance of a particular commodity or a basket of commodities. They are traded on stock exchanges like regular stocks and offer diversification without the need to buy and store physical commodities.

Commodity Mutual Funds:
These funds pool money from multiple investors to invest in a diversified portfolio of commodities. They are managed by professional fund managers and provide a convenient way to invest in commodities.

Direct Investment:
You can buy and hold physical commodities such as gold, silver, or agricultural products. This approach requires storage and maintenance considerations, making it less practical for most investors.

Commodity-Related Stocks:
Invest in companies that are directly involved in the production or distribution of commodities. For example, mining companies for precious metals or energy companies for oil and gas.

Digital Commodities:
In recent years, digital commodities like cryptocurrencies have gained popularity. Bitcoin, for example, is often referred to as "digital gold" and is considered a store of value by some investors.

Commodity FAQs

What is commodity trading?

Commodity trading is the buying and selling of raw materials or primary agricultural products, often standardized and interchangeable with other goods of the same type.

What are some common commodities traded in commodity markets?

Common commodities include metals (e.g., gold, silver), energy (e.g., oil, natural gas), agricultural products (e.g., wheat, coffee), and more.

How do I start trading commodities?

To start trading commodities, you need to open an account with Libord Brokerage, educate yourself about the markets, and choose a trading strategy that suits your goals and risk tolerance.

What's the difference between spot and futures trading?

Spot trading involves the immediate exchange of a commodity, while futures trading involves agreements for future delivery at a predetermined price.

Can I trade commodities through exchange-traded funds (ETFs)?

Yes, you can invest in commodities through commodity ETFs, which offer exposure to commodity price movements without trading futures contracts.

Is commodity trading suitable for long-term investments?

Commodity trading is often considered more suitable for short to medium-term strategies. Long-term investment in commodities may involve additional challenges and considerations.