Published : March 31, 2021
By now we all know that trading in commodity is an activity that involves buying and selling or trading and investing in commodities. Unlike stock trading, where a trader buys and sells the stocks, trading in commodities is the one where buying and selling of commodities takes place on major commodity exchanges like MCX and NCDEX. Commodity Trading too is affecting by the demand and supply. Thus, when the supply of a commodity is limited its price increases, while an excess supply results in the fall in prices. Therefore, the commodity trading process is directly or indirectly affected by the demand and supply of commodities.
Commodities are traded either on a spot level or as future contracts. A futures contract is an agreement wherein two parties agree to buy and sell an asset at a certain future time in the future at a certain price. Thus, in commodity future contract, the underlying asset happens to be a commodity.
Online commodity trading just like online stock trading comes in with a bunch of advantages which make the entire process of trading easy, fast, and convenient for the investors and traders. Here are some of the advantages offered by it:
Despite being a beginner trader you get access to all the research and trading facilities that will help you in executing your trades. You can take decisions related to when and what to buy and sell either by conducting your own research or by going to the market research reports shared by your commodity broker.
Commodity trading has been there for decades. More and more traders are now shifting to online commodity trading owing to the convenience, diversification, flexibility and ease of trading it offers. However, despite the advantages online commodity trading offers, it does come with its own set of drawbacks. Some of the disadvantages of online commodity trading include the need for having a mentor, leverage which acts as a double edge sword, and over trading. All these disadvantages can be waived off if you are cautious while trading commodities.
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