Taking the first step into commodities trading can be daunting, especially if you have no idea what to do or where to start. But with the right approach and the proper knowledge, you’ll find that trading in commodities can be a very lucrative and rewarding business venture, giving you greater profits over traditional investments like shares and bonds. Let’s look at some simple tips on how to get started with commodity trading in Tamil.
Step#1. Understanding Commodity Trading Exchanges
Commodity Trading Exchanges are specialized organizations that provide an electronic marketplace for buyers and sellers of commodities. Most commodities are traded on National Commodity & Derivatives Exchange (NCDEX) Limited, Multi Commodity Exchange of India Limited (MCX), National Multi Commodity Exchange (NMCE), ACE Derivatives Exchange (ACE), and Universal Commodity Exchange (UCX).
There are three main types of commodity trading in Tamil on which commodities are traded.
- forward contracts,
- futures contracts,
- options contracts.
Step#2. Choosing The Right Broker
With several brokers offering their services online, choosing one that suits your trading style can be overwhelming. So how do you prefer?
Start by learning more about commodity markets, markets for raw materials like metals, energy sources, agricultural goods, livestock, and other staples. Here are the steps:
- Select a broker that specializes in futures and options trading
- Avoid brokers with hidden fees and commissions.
- Check to ensure that the company is registered.
- Please find out how close their spreads are before you make any trades.
- Find out the commission schedule so you know ahead of time your total cost for making a trade. Use a commodity margin calculator to calculate the trading cost.
Step#3. Opening Commodity Trading Account
A commodity trading account is a brokerage account that allows investors to buy financial contracts or commodities.
- Filling application form
- Submitting KYC
- Signing member-client agreement
- Providing the required income proof
- Submission of demat account details
Pro Tip: The commodity margin calculator will give how much money you need to open a commodity trading account, so it will be easy to compare different companies.
Step#4: Making an Initial Deposit
One of your biggest hurdles in beginning commodity tips today is making an initial deposit. The brokers will not allow you to make trades if your account doesn’t have enough funds. You can start with a minimum deposit of Rs. 5,000. You need to ensure that you have a payable margin upfront. It’s usually 5-10% of the commodity contract’s value.
Step#5: Creating A Trading Plan
The best way to get started is to create a plan that details your goals, strategies for achieving those goals, resources needed, risk management techniques, and contingency plans. Then all that’s left is following through on your commitment by doing what it takes. Make sure you also have all of your resources lined up before beginning.
While commodities offer plenty of investment opportunities, investors need to understand that they are still high-risk investments. As such, commodities should only be considered by investors who can afford significant losses. Before making any investment decisions, ensure that you fully understand all associated risks