Along with shares, investors also indulge in buying and selling commodities. This helps in expanding their portfolio and gaining better returns. These commodities include agricultural, energy, metal, and bullion products that can be transacted using a free trading account. Here’s how you can start trading commodities.
Start Trading in Online Commodities Using a Free Trading Account
1. Familiarity with the Commodity Exchange Platforms
The first step for trading is to learn which stock exchange platforms are involved in commodity buying and selling. In India, the leading commodity exchanges are –
- Multi Commodity Exchange of India
- National Multi Commodity Exchange of India
- National Commodity and Derivative Exchange
If you are planning to get involved in online commodity trading, these exchange platforms are the best choices.
2. Open a Commodity Trading Account
Appoint a trusted stockbroker to help you invest in the right commodities for better returns. Once you have done that, the stockbroker will open your free trading account to start investing. The broker will fill out the form and provide the important documents and details for verification purposes. He/She will cross-check that information and verify your risk-taking ability and credit score to open the trading account.
3. Initial Deposit Amount
Once your online commodity trading account is open, you have to add a small amount as an initial deposit. It can be 5-10% of the contract value, which entirely depends on the commodity you are buying. You always have to keep a marginal amount in the account to cover up in case there are any losses.
4. Devise a Commodity Trading Plan
To stay safe in the future, it is also wise to strategize a plan that helps you improve your risk-taking capability and market understanding. Chances are that the trading plan of one investor may not be suitable for another. That’s why a stock broker company should always use all the technical and fundamental tools to analyse and create an effective investment plan. This plan generally depends on the objectives and trading style of an investor.
Ways to Buy/Sell Commodities
Here is how you can buy/sell commodities through a free trading account –
- Direct Investment: Direct investment is a common practice of online commodity trading. But it might come with an increased transaction cost.
- Stock Purchase: To invest in a commodity, you can purchase the stocks of that particular company. Through this method, you might earn a profit, regardless of the performance of the commodity.
- Mutual Funds and ETFs: You can invest in commodities based on ETFs and mutual funds. They are electronically secured in the account; thus, there are no issues regarding purity or quality.
If you are interested in commodity trading, it is important to have complete knowledge and information about the market. You should practice tools and techniques to devise a plan and then begin buying and selling. In the long run, online commodity trading can be beneficial. The key is having the right risk appetite and a proper plan.
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