11/08/2016 Before start investing in commodity market investor should
have complete basic knowledge on about commodity tips.
Commodity Market:
the basic point is that it deals in economic sector rather than manufactured
products. Mainly there are two type of commodities soft commodities and hard
commodities.
In Soft Commodities agriculture product comes like wheat,
cocoa, sugar, coffee in hard commodities include mined like gold and oil.
The Government of India permitted initiation of
National-level Multi-Commodity exchanges in the year of 2002 -2003 and
according to this following exchanges have come into picture. They are
·
Multi-Commodity Exchange of India Ltd, Mumbai
(MCX).
·
National Commodity and Derivatives Exchange of
India, Mumbai(NCDEX).
·
Indian Commodity Exchange (ICEX)
·
National Multi Commodity Exchange, Ahmadabad(NMCE).
This commodity exchange is regional commodity exchanges and
also functioning all over the country.
The most important query is why trading in commodity the
most important two things are there first is Hedging and another is
Speculation.
Hedging: Against
the exposure towards physical trades -for risk management.
Speculation: Having
no exposure in physical form.
Now the point comes in every new trader mind How to trade in
commodities: Investors trade in commodities in the form of indexed futures
contracts.
Futures contracts:
It is a systematize contract which amounts to an agreement to sell or buy a
specified capital of standardized quality and quantity at a specified future
date (which is known as the contract’s “expiry date”) at a cost agreed today
(the futures price).
One of the most important factors in this market is commodity indices?
Commodity Index is a exact or average of selected commodity
prices. This may be based on future price or spot price. Basically spot price
of a particular commodity is current prevailing market cost of that commodity being
quoted for immediate settlement. The purpose
of design commodity index is to representative of the board commodity capital
class, subset of commodities like metal or energy and to track a individual
single commodity like gold.
Investor who would like to maintain its maintain position in
a non-physical form could suffer some practical issues in this case investor
can do rolling from one future to another means if investor wants to maintain a
future position first past the expiry date of that future contract which
investor is holding, they can also sell to its expiry date and purchase a
future contract.
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