What is Commodity Trading? Are they worth investing?

What is a Commodity?

A commodity refers to any material thing which has its intrinsic value and can be exchanged for money or other goods and services. Usually, commodities are referred to as raw materials used to manufacture finished goods. Examples of commodities are wheat, gold, and crude oil.

How does commodity trading work?

A trader buys a commodity from one person or company and sells it to another person or company for profit. Commodities can be sold as currency as well as physical goods but most of them are sold as material goods.
A commodity can be bought and sold, just like you trade in equity and shares. When you buy a commodity expecting a future price appreciation. You sell it when the future price hits the expected target. On the other side, sellers of a commodity sell it when they think there is no room for appreciation in future prices.

Why trade in commodities?

1. Diversification: Commodities have little to no correlation with traditional classes of assets such as bonds/stocks. Often commodities rise during periods that see a fall in stocks and bonds. This helps lower portfolio risk for traders.

2. Hedge against inflation: Due to unpredictable event risks such as economic crises, natural disasters, and wars that affect the economy. Currencies can lose purchasing power during periods of inflation. In periods such as these commodities often tend to rise and can protect the trader by acting as a barrier against such events.

3. Leverage: You can control considerable amounts of money with small deposits by using 'leverage' to potentially magnify your losses.

4. Immense Trading Opportunities: Commodity prices are generally quite volatile. This acts in the favour of traders by opening up plenty of trading opportunities. Traders can profit from upwards as well as downward price movements.

When should you buy commodities?

There is no specific time that constitutes the best time to buy commodities. Commodities are a hedge against inflation, so buying before periods of inflation is a good investment strategy; however, predicting when inflation will occur can be tough.

A commodity should be viewed as any other investment, taking into consideration an investor's time horizon and risk profile. Buying a commodity when it is at a low price and its future outlook appears strong based on fundamentals is always a good time to buy for a long-term horizon.

Are Commodities a good investment?

Like any good investment, commodities can also come with risks. An investor needs to understand the markets of the commodity in which they wish to trade. For example, the fact that oil prices can fluctuate based on the political climate in the Middle East.

Benefits of Trading in Goodwill

First, you can start by opening a Demat and Trading Account with Goodwill. It is a free opening and you can start trading the same day after creating your account. Get Live MCX commodity share price in India.
You can trade at a lower margin Commodity Future Contracts which is lower than any other market. You get the advantage of timing from 9 AM to 11:30 PM on weekdays, so you can trade accordingly.
You can then purchase shares in the commodity-specific company of your choice or a commodity ETF after you have done your research and determined the specific investments that are right for you.

How Goodwill can help you start trading commodities?

When you are looking for a commodity trading platform, you need to be guided by your needs. With Goodwill Wealth Management, you can enjoy the lowest brokerage charges and get on-time support.

We also provide a free Demat and Trading opening service to every customer who wants to start trading with us. You can trade anywhere and anytime without worrying about your account getting hacked or being blocked due to suspicious activities. Open a commodity trading account in India within 10 minutes today!

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