What is Commodity Trading, what is commodity trading in the stock market? How beneficial for investment, understand – what is commodity trading in stock market know how to buy sell and its benefits
Commodity market is a marketplace where investors trade in various commodities like spices, precious metals, base metals, energy, crude oil etc. Commodity goods are generally classified into four types, while two types of goods are traded in India.
- Agricultural or soft commodities include spices like black pepper, coriander, cardamom, cumin, turmeric and red chillies, besides soya seeds, mentha oil, wheat, gram.
- Non-agricultural or hard commodities include gold, silver, copper, zinc, nickel, lead, aluminum, crude oil, natural gas.
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What is the difference between equity market and commodity market?
- Shares of listed companies are traded in the equity market. In this raw material is bought and sold in the commodity market.
- Equity holders are called shareholders, while commodity holders are called options.
- Shareholders are considered partial owners of the company, but not commodity owners.
- Equity shares do not have an expiry date, but commodities do not.
- Shareholders in the equity market are considered eligible for dividends. On the other hand, there is no provision for dividends in commodity markets.
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Major Commodity Exchanges in India
There are major exchanges for commodity trading in the country. These include Multi Commodity Exchange (MCX), National Commodity and Derivative Exchange (NCDEX) as well as Universal Commodity Exchange (UCX), National Multi Commodity Exchange (NMCE), Indian Commodity Exchange (ICEX), ACE Derivatives and Commodity Exchange Limited.
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How does commodity market trading work?
A demat account is a must if you want to start trading in commodities. A demat account will secure all your transactions and holdings, but you have to go through a broker to place orders on the exchange.
