Commodities have great potential to become a separate asset class for the long-term investors. Many investors considered it as a risky segment to trade but it can provide a good return if risks are properly managed by investor. Starting in trading should be well planned, and a trader must have to complete all the legal formalities and requirements before entering market. If a trader is new, he can take suggestions from commodity market experts by taking commodity tips and gold and silver tips for a positive return.
How can an investor start trading in commodities –
1. where do we need to go to start trading?
A trader has three options available, there are three main exchanges – The Multi Commodity Exchange of India (MCX) , The National Commodity and Derivative Exchange (NCDEX),and The National Multi Commodity Exchange of India (NMCE). These three exchanges are major exchanges and have electronic trading systems and also have their presence nationally. A number of broker associated with each or all of these commodity exchanges and a trader can choose any of these to start a trade. They can find some new age brokers which offer online trading in commodities.
2. Documentations –
The need for documentation is just same as traditional equity market. A trader needs a bank statement, address proof, ID proof – PAN Card or voter card. Your broker will help you to get familiar with the KYC procedure.
3. Minimum capital requirement –
An investor can start with the low amount, he can start with an amount as low as Rs 5,000-10,000. All a trader required to give some money as margins which are payable upfront to exchanges through brokers. The margins range starts from 5-10% of the total value of the commodity contract.
4. Broker’s charges –
The total cost of brokerage is not the same in every commodity trading, broker’s fee will be different for different commodities. It will also vary according to trading transactions and delivery transactions.
5. Who is the regulator of commodity exchanges –
The commodity exchanges are regulated by the FMC- Forward Markets Commission. It is different from equity market as brokers don’t need to register themselves with the regulator.
6. Where one can take information related to commodities –
The daily newspaper will help in the case, or if you do not have much time you can also check online websites of economic times or moneycontrol. They daily provide article and news related to commodities. Many brokers also provide research report and analysis support to their clients for better performance. A trader can also take help of leading sebi registered investment advisor for commodity investment guidance. It will improve profit results and increase the confidence of traders.