Indian Commodity Market (mcx & Ncdex) And Its Trading Strategies

But first, you might ask what is a commodity? commodities are goods we are each one portion is the same as the other

. For examplee, oil is a commodity because one barrel of oil is the same as the next. Wheat is also a commodity each bushel of wheat is identical to every other bushel of wheat and anyone purchasing them could care less whether they get bushel number one or bushel number two. Gold is another example of a commodity. 1 ounce of gold is the same as the next. There are some differences in some commodities to external forces such as shipping costs or differences in composition. For example, not all oil sells for the same cost because they may come from different sources were shipping is a consideration. Also they may trade on different markets where the pricing is different.

Commodities Market is an upcoming and fiercely growing market after the Stock Market. In this, Multi-Commodities like Bullion (Gold, Silver), Cement, Chemicals, Cotton, Dry Fruits, Food Grains, Gur & Sugar, Iron & Steel, Jute & Jute Goods, Kirana, Metals, etc. are traded on a day to day basis. Interests of individual investors are catching on fast in this type of Exchange.

There are 3 National Exchanges for enabling the purchase and sale of commodities, futures and options. These are:

1. Multi-Commodity Exchange of India Ltd. (MCX)

2. National Commodities and Derivatives Exchange Ltd. (NCDEX)

3. National Multi-Commodity Exchange of India Ltd.

Commodities are defined as anything that is traded or exchanged through commerce. Simply put, investing in commodities market instruments is a way for investors to "diversify" their funds and make their financial portfolio look better. Investing in this area, however, can be more easily said than done in some cases. Because there are numerous ways to invest, for both the beginner and the veteran investor, commodities can be a tricky investment to consider.

Trading strategies to be followed in Commodity market:

1) In commodity market the trader should follow a strategy after checking their risk tolerance, comfort levels, knowledge of the markets. Doing this will clear your mind in case of risk tolerance that up to which amount of loss you can tolerate.

2) In commodity trading you can also follow "Trend Following" strategy that most of the professional traders use and recommend. The strategy says that the prices that are in a trend have a higher probability of continuing in that direction. Therefore, the odds should be in your favor by taking trades in the direction of the trend.

3) You also have a choice you can follow "Range Trading" when markets is not in a trend. In commodity markets range trading strategy, you would sell the commodity to market when it gets to the top of its range and buy it from the market when it gets to the bottom of its range. This strategy can work very well for a long period of time, but you have to be careful when the market breaks out of its ran. The person who is Trading in commodities can use these strategies and can grab profit.

by: awadesh123

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