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Why Trade in Commodity Market ?


Why Commodities?

*   Commodities are easy to understand and have positive correlation with inflation.

*   The Commodity market are global in nature, hence less risk for manipulation.

*   Every commodity have seperate market in itself and hence many such market is simulated at one single screen.  The trend in one commodity not necessarily have correlation with the trend of other.

*   Historically Commodities have outperformed the Stock Market.

*   Diversification through a different asset class.

*   Low Margins - 4%  -  10% only


Why Commodity Trading?

Let s say you want to buy gold because you believe that the price of gold will rise.


         
what will you do?

You will probably buy gold bars, store them, wait for the price to go up and then sell them. Problems:  You have to be sure whether the Gold is  pure or not, you will need a safe place to store it thus  require security and other hassles.
  

Solution:  Just buy Gold Futures from the Commodities Exchange

Trading in Commodities Market

∆  Clients registered with brokers who hold the Commodities in Electronic Form through Trading Account ( Only Futures are traded in Commodities Market)

∆.  Markets Open for trading between 10.00 am to 12.00 pm (midnight).

∆.  Brokers place Buy and Sell orders on behalf of clients within the time stipulated above.

∆.  Broker charges commission on the Buy and Sell which are executed on the exchanges through the Unique Client ID.

∆   Settlement will be done by the Clearing Corporations for the trades done on the same day and it will be fresh settlement on daily basis.

∆   At the end of contract period Buyer of the Contract has to give the delivery of the Commodity and Seller of the Contract has pay the Price.

∆   Trading carried out two types : 1)  Intraday ( Buying and Selling happens on the same day ) and 2)  Delivery : Buying happens on different date and selling happens on subsequent date.

∆   Only few Commodities like Gold,  Silver are kept in the warehouse specified by the Exchanges under strict regulations.  Crude Oil, Natural Gas, Electricity are settled in cash.

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