Commodity trading has been happening in India for many years and is directly linked with the buying, selling and trading of commodities. This particular concept in India is normally undertaken through derivative contracts for example commodity futures and options. The commodity derivative contract will be the one that will derive its value from the underlying asset which will be the commodity.
Following are the most important advantages of indulging in commodity trading systems in India:
1. It will help in providing the people with complete protection against inflation because as the demand for goods and services will rise it will lead to an increased price of the goods and services in the industry. Hence, in this particular inflationary environment, people will be very much successful in terms of beating inflation without any kind of problem whenever they will indulge in commodity trading systems.
2. This is considered to be the best way of hedging against the risky geopolitical events which are referred to as the conflicts, disrupting of the supply chain, riots, wars and several other kinds of things which can lead to different issues for the commodities.
3. During all these kinds of issues, the stock prices are falling drastically what is going with the option of investing in commodities will always help in stemming losses into the investment portfolio.
4. There will be a very high leverage facility with the help of commodity trading and the best benefit is that people will be having a very high degree of leverage. The minimum margin for the commodities may vary but it will be very lower than the stocks and there will be a good opportunity of getting humongous returns by leverage into the commodity trading systems.
5. Commodities also have a very good impact with the help of diversification in the best benefit is that it will even perform better when the rate of inflation is rising. Because of the negative correlation of the price of commodities, the stock price will be coming down and the losses incurred into the stocks can be easily adjusted against the gains again by the commodity derivatives. Hence, adding the commodities will always help in providing a good amount of diversification to the investors in terms of their portfolio and will make sure that they will be availing several kinds of advantages.
6. Commodity trading is also based upon a good amount of transparency in the whole process because investing in commodities is now based on an electronic trading platform that is easily accessible to all the participants of the market and the best benefit is that it will be based upon fairness element throughout the process which will make it free from all kinds of risks and market manipulations.
7. Commodity trading market also helps in providing people with great growth opportunities because this particular market will always be based upon the principle of demand and supply which will further make sure that any kind of increase in demand will always have a direct impact on the price. Hence, there will be immense opportunities of generating higher profits in a very limited amount of time.
8. People will also have the opportunity to the diversification of their portfolios because this is the best possible way of ensuring that the portfolio will be very much safe and stable. The commodity market is the most preferred source of diversification from the investment point of view and investments into all these kinds of commodities are the best way of managing the risk into the market without any kind of problem.
9. Inflation is a very harmful factor for the regular traders which is the main reason that it can drop the income from stocks and bond investments but commodities are very much positive during the periods of inflation because any kind of increase in the prices of goods and services will lead to the increasing demand of commodities required for production and will help in increasing the cost.
Following are the types of commodities in which people can very easily trade:
ü Metals: This particular category can include precious metals like silver and gold as well as non-precious metals like copper and lead. Investing in precious metals is considered to be a very good market opportunity because of the high liquidity associated with it and on the other hand, this is also considered to be the best possible way of having the best hedging instrument to beat inflation and currency devaluation. The people should move with proper planning in this particular area.
ü Energy: As this particular name of the category sounds this will include the different sources of energy like natural gas, crude oil and various other kinds of things which is the main reason that many new traders and investors are attracted to words all these kinds of categories so that there is a huge shift in the production pattern which will have a direct impact over the energy sector. The advancements in technology also help in making sure that alternative sources of wind energy, solar energy and several other kinds of things will be taken good care of in the whole industry.
ü Agriculture: All these kinds of commodities are originated from agriculture and will include different kinds of categories like maize, cotton, Soyabean and various other kinds of things. This particular category has been affected by the climatic patterns and weather conditions and further any kind of change into the rainfall pattern will affect the production and will also have a direct impact on the demand and supply system of the commodities.
Hence, going with the option of investing in commodity trading systems is a very good idea because people can very efficiently hedge against the risk of unpredictable events which could impact the financial markets and the best benefit is their portfolio will be perfectly diversified and people will be availing good returns in the long run. Companies like 5paisa are there in this industry to provide people with top-notch access to such opportunities so that people can trade and excel.