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How to Start Commodity Trading?

Any type of trading demands considerable study and knowledge of the market. Commodity trading is just the same. The face of trading in India changed as technology evolved, and internet trading came into existence.

Here you can get an idea of how to do online commodities trading in India.

Before you begin trading, you must first learn the fundamentals of commodity trading.

What is Commodity Trading?

Commodities can be categorized in the following forms:

  • Agricultural commodities such as Cotton, Rice, Corn, Beans, Wheat, etc.
  • Energy sources such as natural gas, crude oil, etc
  • Livestock and meat such as Cattle, Eggs, etc
  • Metals such as Gold, Silver, Copper, etc

Commodities are traded in the commodity market as spots and futures.

In India, Where Can You Perform Commodity Trading Online?

You can do commodity trading in the following exchanges:

  • Multi Commodity Exchange
  • National Commodity and Derivatives Exchange
  • Universal Commodity Exchange
  • National Multi Commodity Exchange
  • Indian Commodity Exchange
  • ACE Derivatives & Commodity Exchange Limited

Steps To Start Commodity Trading

Before beginning the trading in commodities, all traders must be

  • Very well-versed in markets, commodities, and the economics that generates price movements in commodities
  • Do technical and fundamental analysis to make the best judgments and move in the commodities market.
  • Traders should be aware of all relevant data and requirements before starting.

There are various additional aspects of the commodities market that a trader should get acquainted with. Here are some easy-to-follow steps to assist people to get started with commodity trading.

Step 1 – Selecting the Efficient Stockbroker

The most important step to start commodity trading is to select a dependable and competent and best commodity broker. The brokers help the traders inform about commodity trading and make informed decisions through their recommendations.

While selecting a trading platform, the trader must know about the brokerage fee, clearing fee, platform fee, commission, etc. The main factor that a trader should look at while selecting a broker is the services they provide.

However, several efficient full-service brokers in India offer excellent service for a trader to start commodity trading.

Step 2 – Opening the Commodity Trading Account

Once a trader has chosen a reputable brokerage firm to begin commodities trading, the next step is to open a Demat account. He has to submit the filled application form and give it to his broker with all relevant information.

The company selects whether or not to create the account based on the investor’s credit, trading expertise, and risk-taking ability. The broker examines the data to ensure that the trader would be able to pay off its debts if the market falls.

When the application is approved by the broker, the Demat account is opened immediately.

Step 3 – Make an Initial Deposit

The trader should make a little investment to begin trading after the account has been set up. They must, however, deposit the first margin, which is usually between 5 and 10% of the contract value.

Step 4 – Create A Trading Plan

The main goal for creating a trading strategy is to be familiar with and understand the market. It also takes into account his financial competence, risk appetite, and personal style. A brokerage firm assists the trader in gaining the necessary expertise, experience, and information.

They give them all of the required fundamental and technical analysis tools and platforms to assist them in developing a successful trading strategy. The trader must also develop tactics that are appropriate for their trading style and goals.

Final Thoughts

A trader must be well-versed in all relevant facts before beginning commodities trading in India. The trader must also practice all of the tactics in order to avoid losing more money than he can afford.

One of the most important aspects of becoming successful in commodities trading in India is that a trader must put in a lot of time and attention to prepare and succeed.