A DEFINITIVE GUIDE ON COMMODITY TRADING
INTRODUCTION •
There are six major commodity trading exchanges in India as listed below.
1. Multi Commodity Exchange – MCX 2. National Commodity and Derivatives Exchange – NCDEX 3. National Multi Commodity Exchange – NMCE 4. Indian Commodity Exchange – ICEX 5. Ace Derivatives Exchange – ACE 6. The Universal Commodity Exchange – UCX
Source: www.angelbroking.com
WHERE TO INVEST IN COMMODITIES?
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Commodity trading is one of the foundations for the global trading system that trades various commodities from primary economic sector which act as building blocks for production.
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These are raw materials standardized and interchangeable with other goods.
COMMODITY CLASSIFICATION •
In general, commodities are classified into four types:
1. Metals – Silver, Gold, Platinum, and Copper 2. Energy – Crude oil, Natural gas, Gasoline, and Heating oil 3. Agriculture – Corn, Beans, Rice, Wheat, etc., 4. Livestock and Meat – Eggs, Pork, Cattle, etc.,
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HOW TO TRADE COMMODITIES •
Source: www. forbes.com
There are a few different ways to trade commodities in your portfolio, with their own advantages and disadvantages.
COMMODITIES FUTURES
Source: www. forbes.com
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The most common way to trade commodities is to buy and sell contracts on a futures exchange.
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The way this works is you enter into an agreement with another investor based on the future price of a commodity.
PHYSICAL COMMODITY PURCHASES
Source: www. forbes.com
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For precious metals like gold and silver, individual investors can and do take possession of the physical goods themselves.
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These investments give you exposure to commodity gold, silver and other precious metals and let you feel the actual weight of your investments.
COMMODITIES STOCKS
Source: www. forbes.com
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Another option is to buy the stock of a company involved with a commodity.
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For oil, you could buy the stock of an oil refining or drilling company; for grain, you could buy into a large agriculture business or one that sells seeds.
COMMODITIES ETFS, MUTUAL FUNDS AND ETNS
Source: www. forbes.com
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There are also mutual funds, exchange traded funds (ETFs) and exchange traded notes (ETNs) that are based on commodities.
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These funds combine the money from many small investors to build a large portfolio.
COMMODITY POOLS AND MANAGED FUTURES
Source: www. forbes.com
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Commodity pools and managed futures are private funds that can invest in commodities.
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They are like mutual funds except many of them are not publicly traded, so you need to be approved to buy into the fund.
SHOULD YOU INVEST IN COMMODITIES?
Source: www. forbes.com
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Commodity investing is a strategy that’s best for sophisticated investors.
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Before making any trades, you need to carefully understand the commodity price charts and other forms of research.
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