Commodities market upholds the interest in last few years after stock market. The heavy fluctuation can be observed in commodities due to micro as well as macro-economic factors. Agro-commodities are highly sensitive to climate conditions and other metals are conducive to demand and supply ratio. At present, the annual turnover of commodities globally account to 21719737811.7$ (21.71 Billion $)
Commodities market contains spot and future trading which has future options, forward and spot prices. Subsequently, price of commodities are set according to a speculators mindset and also according to demand & supply. Physical commodities are bought in cash/spot markets and sold at a negotiable price between buyers and sellers.
These commodities are further divided into hard and soft commodities wherein hard commodities are induced with oil and gold while the soft one’s are induced with wheat, coffee, cocoa, and sugar.
A commodities exchange has executed rules and regulations which provide well-balanced practices between buyers and sellers in the market. Furthermore, it expeditiously provides market information and valuable prices to interested market participants.
xDirect Markets trades wide range of commodities be it metals or energy products or agricultural commodities.
Metals: Metals prove to be great source of investment in the commodities market and provide huge profits. Subsequently, they can be further divided into two branches mainly ‘precious metals and industrial metals’.
Agricultural Products: Agro commodities are part and parcel of human kind and the whole world is dependent on agriculture. The agriculture sector comprises 36% of world’s workers with India estimating to 65% of its workers involved in the sector. xDirect Markets trades in sorted range of commodities such as ‘cocoa, soybean, cotton, sugar, corn and wheat’.
When compared to Forex, Commodities have nominal transaction values, trading time and lower margins. The profit can be fetched in commodities through buying and selling medium. All you have to do is, buy at lower side if one is bullish and sell at higher side if bearish.
Commodities trading is risky at times. However, you can invest in precious metals like platinum, silver and gold. Hence, this safeguard’s the traders from inflation and uncertain economy of the market.
A person can diversify its portfolio by investing commodities as this market moves differently from stock or currency markets. In Future, if the stock market crashes, you don’t lose a major chunk of amount.
Commodity market holds transparency, especially with respect to future market due to fair price discovery and active participation among traders. This helps in generating more profits if wisely invested.
As there is huge price volatility in the commodities market, it proves to be a risky form of investment. Large cap companies either shoot up or slump down with heavy losses.
The main function of hedging is to mitigate the loss of investor. Hedging acts as an insurance against inflation. The price of commodity goods shoots up on the commencement of inflation, when investors sell of their bonds and stocks.
Commodities future investment offers high liquidity. Liquidity generally occurs when an asset has a high level of trading activity.
Commodities market is highly volatile and is full of uncertainties as they quickly react to global events. Hence, exchange acts as a middleman and helps in safeguarding counter party risks to investors.
Below are the list of benefits you will receive when you start trading with xDirect Markets.
Commodities consent a portfolio to mend total return at the same level of risk. One of the leading based U.S. based authority Ibbotson Associates, on asset allocation projected that commodities increased returns between 133 and 188 basis points, at no extra risk.
Commodity Futures Trading Commission (CFTC) is the prime regulator of commodities and future markets. The CFTC is an independent agency of the US government which was created in 1974. Apart from this, the Commodities Exchange Act prohibits falsified conduct in the trading of future contracts.
A short position consists of selling future contracts or selling of cash commodities without balancing future transactions. (A cash commodity is a genuine, physical commodity someone is buying or selling, like corn or soybeans, also referred to as actual.) A long position includes buying future contracts or possessing the cash commodities.
Hedging is when you use an instrument for price defense comprising the balancing of price-change danger in any cash market position by taking an equal, but differing position in the same market. Whereas Speculating is buying and selling an instrument, especially future & options contracts to make a profit. A speculator will buy and sell by according to his guessed future price movements, but has no intension to essentially possess the physical commodity. Therefore, speculators assume market price risk and add liquidity and capital to the future markets.