Education

How to Choose Commodities For trading

commodities trading

Commodities are raw materials used in manufacturing and making products. It is also used in agriculture and in bullion. Investing in commodities can be done by large institutions as well as individuals to corporates. Money can be made by trading or investing as it is physically backed and is deliverable unlike securities. Market participants can choose the right products and trade in commodities

ADVISE AND RESEARCH

You will have to determine whether to opt for your own research or hire a qualified researcher to do the job for you. It is always advised to have some basic knowledge even if you are hiring a professional. Understanding and choosing commodities can be a full time job and requires expertise and experience. If you select a financial advisor than you should go through his or her details before committing to trade.

PHYSICAL DELIVERY AS AN INVESTMENT

You can invest and choose a product and get it delivered hoping for the price to rise. But delivery of materials can incur a cost which you have to add to your costs. You can buy gold or silver or simply book shipments of base metals hoping for the price to rise. You can register with a broker or affiliates of the concerned exchange to avail of this benefit.

COMFORT LEVEL

While choosing a commodity you should be comfortable in trading it. If you have never heard of that product and have no knowledge of its usage and availability,its historic price movements than you should avoid that product. While trading you should be comfortable with its chemical name and properties before choosing. If you are dealing in those products or doing a job in that industry than your confidence and comfort level rises.

SELECTING A CATEGORY

It is always helpful if you can focus on a selected category in commodities. It is broadly divided into Base, precious energy and agriculture. After selecting a broader head you should again sub divide the products in that category to zero in on a product or multiple products for trading. You should be careful in choosing the commodities as wrong choice can lead to financial losses and proper advise and research is required.

RESOURCES AND FUNDS

While choosing a category you should be careful as some categories have high volatility. Market fluctuations can greatly vary. Some products are not that volatile and can move in a narrow percentile range. You should check your risk taking appetite before choosing. High volatility products can be risky Futures commodities trading require very little funds as compared to delivery and you can mange your resources but should remember that it can greatly increase your leverage and positions which in turn can be counter productive.

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