In India, how does commodity trading work | Motilal Oswal
In India, how does commodity trading work | Motilal Oswal

How Commodity Trading Works In India

In 2021, India reported that it had exported services and goods to the tune of $299.30 billion USD. Some feat, by any standards! Most of the commodities in question were wheat, rice and pulses. The commodity market in India, devoid of any commodity online trading at that time, goes back as far as 1875. In that era, the Bombay Cotton Trade Association  was at its peak of business. Nowadays, considering India’s rich history of commodity trading, India’s market of commodities is viewed as a lucrative avenue for the creation of wealth. In the digital age, with online commodity trading at an investor’s fingertips, this channel of investment is appealing. However, you must know some basics first. 

  • A Commodity

When you wish to start trading in a commodity online, you should first ask yourself, “What is a commodity?” A commodity represents any product that is used in daily life. Simply put, it can be anything from food, metals, energy, etc. Primarily, the main commodity types include: 

Energy - Including gasoline, crude oil, gas, etc.

Agricultural Goods - Consisting of cocoa, rice, soybean, wheat, ragi, etc.

Valuable Metals - Precious metals like gold, silver and platinum come under this class of commodities. 

Other Metals - Copper, nickel, aluminum and certain other baser metals are part of this group. 

  • The Meaning of Trading

Any commodity online trading tips begin with knowledge of what a commodity is and what trading means. Trading, in the most basic way, is a system of barter. Fundamentally, it is the process of exchanging a product for another product. The concept of commodity trading, therefore, essentially involves the selling and buying of services and goods and getting cash in return. When you consider the stock market, trading refers to the purchase and sale of stocks and shares. Commodity trading, mostly undertaken as online commodity trading today, involves the buying of commodities online, for profit later. 

  • Online Commodity Trading in India

In rural areas of India, commodities have been exchanged for cash and kind for several years. Today, in the most advanced global stock exchanges, India included, commodity online trading is a common way to invest. The system of trading is secure, seamless and  conducted in a planned manner, with rules and regulations in place. Just as stocks and shares are traded through exchanges, such as the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), commodities are traded on exchanges that facilitate commodity trading. These are essentially the NSE or the MCX (Multi Commodity Exchange). Furthermore, commodities futures online trading, Bloomberg being the broker of repute, is a sought-after way to trade in commodities, based on a contract to trade with a future price. 

  • Trade in Commodities

Trading in commodities is not a challenge. You can easily learn how with a broker friend like Motilal Oswal, offering you learning tips and a user-friendly online trading platform. 

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