Basics of Stock Market - Beginner

NCDEX - Learn All About NCDEX

Why trade in commodities?

Trades can not only be made with shares, but also with commodities such as oil, wheat and soybeans, as well as other commodities such a gold, silver, and so on. The commodity market is used primarily for hedge purposes. Think of a farmer worried about price fluctuations and fearing that he will lose his crop. He signs a commodity futures agreement in which he agrees that he will sell his commodity at a certain price at a particular time. The farmer is trying to minimize his losses by doing this. Trading commodities isn't just for farmers. Anyone can trade and make a profit. Commodities can be delivered in physical delivery or cash settlement. The market watchdog SEBI is currently making physical settlement mandatory in many commodities.

Market settlement

You should be aware that mark to market settlement is an important consideration when trading commodities. The prices fluctuate daily. The settlement price for the commodity you trade is checked against your agreed price at the end of each trading day. If the settlement price has changed in your favor (i.e. If the settlement price has moved in your favor (i.e. If the price has not changed in your favor (i.e. If the price has not moved in your favor (i.e., if you are a buyer or if it has risen in case of a seller), then the difference is deducted from your trading account. The mark to market settlement is the process of changing prices daily.

Common Misconceptions About the Commodity Market

  • 1. Only large traders are allowed to do this:

    Anyone can trade in commodities. If a strategy is implemented according to their risk appetite and goals, they can make a profit.

  • 2. Low quality commodities

    By using quality control measures, exchanges can maintain the quality and safety of commodities.

  • 3. It is extremely difficult to trade commodities:

    The commodity market is driven by global demand and supply. Anyone can learn how to trade in commodities with a little practice. It is easy to understand the workings of the commodity market by conducting thorough research and staying up-to-date about market conditions.

Trading on the commodity market has many benefits

  • 1. Helps in price discovery:

    Many factors, such as weather conditions, political turmoil and wars, affect the demand and supply. These factors are input signals that determine the fluctuations in commodities' prices. These situations can be used to predict how commodities prices will move.

  • 2. Risk management:

    The main purpose of the commodity market is to manage price fluctuations and potential risks. Exporters, importers, etc. Trading in commodities can bring you benefits

  • 3. Mitigating risk:

    Farmers will be greatly affected by volatility in prices if they don't have the option to mitigate their risk through futures contracts. Futures contracts for commodities can help farmers predict the future price movements, which is a boon as it can reduce their loss.

Commodity trading exchanges:

NSE and BSE are well-known to us all as these exchanges allow for the buying and selling shares. There are also specific exchanges that allow commodities trading. The major Indian commodity exchanges are NCDEX and MCX.

What is NCDEX?

These exchanges allow for the trading of agricultural and metal commodities. NCDEX is a leader in the field of agricultural commodities. NCDEX full form is National Commodity and Derivatives Exchange Limited. NCDEX trades between Mon and Fri, from 10 AM to 11.30 PM.

Individuals, private limited company, public limited company, etc. You can join this exchange. Now you may have a better understanding of NCDEX and the commodity market.

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