Commodity Overview For Beginners

Like stock derivatives, you can also trade in commodity derivatives.

Commodity meaning

A commodity is a product which can be bought or sold.

In financial markets, you will be coming across various commodity derivatives contracts issued by different exchanges.

These commodity derivatives can be traded like any other futures or options contracts.

All derivative contracts will consist of an expiry date.You can trade in those contracts before expiry.

You won’t be able to trade in those contracts after expiry.

If you have an existing position, you can rollover your positions with next contracts.

Commodity market consists of precious metals like Gold, Silver, Copper and also energy products like Crude oil, Natural gas etc.

Every country will have there different commodity products and exchanges. Few examples of commodity exchanges are NYMEX, COMEX, LME, MCX etc.

Commodity prices keep fluctuating depending on real-time supply and demand.

If the demand of any commodity like Gold is high and supply is short, spot prices of gold might increase.

Same way if the supply or production of Gold is high, and demand is weak, spot prices of gold might decrease.

Types of Commodities

You can categorize commodities by the way they are produced.

Soft Commodities

Any commodity which is produced without mining is called as soft commodities.

For example, sugar,corn,wheat etc are soft commodities.

Hard Commodities

Any commodity which requires mining like gold, silver, crude oil etc are classified as hard commodities.

Where to check commodity live price

You can check live prices of various commodities from websites like investing.com,moneycontrol.com etc.

Check prices of commodities like Gold,Silver,Crude Oil WTI in below link.

Investing.com commodity updates

Moneycontrol commodity updates.

Investing in commodities

You can directly trade commodity futures and options contracts like any other derivative products.

If you want to invest in raw commodities, a better option for you will be to buy mutual funds which invest in different types of commodities.

Tips to trade in commodities

Instead of depending on tips or advisory service in commodities,you should look different ways to learn how commodity prices fluctuate.

For example look for various news behind commodity price fluctuations like crude oil inventory or natural gas inventory etc.

If you have a commodity trading account,you can directly speculate through your account.

Pick a good trading strategy and follow it for 90 days.

Best way to start will be to trade with very small capital.

You should avoid losing large capital at the beginning.

Conclusion

Commodities are highly volatile derivative products.

International commodity contracts is open for 24 hours to trade,but you should trade when there is possibility of high volatility i.e involvement of more market participants.

Start with low capital which you can afford to lose.

You can choose commodity specific brokers if you are only interested in trading commodities.

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