Commodity Market Trading

An Insight on Commodity Market Trading

Commodity Market Trading

There are many people who want to excel in the Stock Market as well as commodity market trading. The trading on Stock Market is done through BSE and NSE in India and commodity trading is done through MCX and NCDEX. In commodity market trading is done on major commodities like Gold, Silver and Natural Gas. Due to the impact of international market and changes in conditions, the prices of these commodities fluctuate continuously.

One can trade in the commodity market as intraday trading, short-term trading or for the long term. Basically, the trading in the commodity market can be done in the following three formats:

  • Intraday Trading
  • Short-Term Trading
  • Long-Term Trading

Intraday Trading

In the MCX commodity Intraday trading, the commodities are bought and sold on the same day. The time frame of intraday trading is 1 day. If the commodities are bought at a higher price and sold at a lower price, a loss is incurred. On the other hand, if the commodities are bought at a lower price and sold at a higher price a profit is incurred.

The key rule to become profitable is to buy low and sell high. There is continuous fluctuation in the price of commodities during the day. One has to find the minimum during the day and buy at this level. One also has to depict the high and sell at this level to get maximum profit.

Short-Term Trading

Commodity Market Trading

Apart from the intraday trading, there are options of Short-Term Trading as well as Long Term Trading in front of commodity traders. In the short term trading, the commodity is bought and kept for some time. After some time if the price of the commodity increases one can sell the commodity and lock the profit. In the short term trading, the period of trading ranges from few days to months. The short-term trading is also known as swing trading by many experts.

Long-Term Trading

The third option to trade in the commodity segment is to do long-term trading. In the long term trading, the trader or investor buys a commodity and keeps it for the long term. With the time, the price of the commodities increases and one can bag good profit by selling them. In the long term investment, people buy and keep the commodities like gold and silver. One can see that the price of gold has increased a lot during the past many years. Thus, if anyone would have invested in gold 8 to 10 years ago, he must have amassed huge profit.

Whatever may be the type of trading, one should always use stop loss while trading. The stop-loss tool will help you to avoid huge losses. Based on once risk appetite one can decide the stop loss levels. The stop loss levels should be neither too wide nor too small.

The principles of risk management and wealth management should be followed to trade profitably in both the stock market as well as a commodity market. One can also take the help of advisory firms while trading in the commodity market.

 

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