Commodities are one of the more lucrative asset classes in the market right now. They not only help you hedge your risk, but are also good for generating profits from their short-term price movements. Over the years, commodity trading has caught on quite nicely in India, with an increasing number of individuals participating in the process.
And since the commodity market in India opens at around 9 AM and goes on till 11.30 PM, it is a very good contender for intraday trading. If you’re wondering how to trade intraday in the commodity market, then this article is for you. Let’s start with some things that you should consider while taking part in commodity intraday trading.
Here are a few pointers that you should always keep in mind when partaking in intraday commodity trading.
1. Keep your focus on a few commodities
When trying to partake in commodity intraday trading, it is important to restrict your focus down to just a few commodities. Since each commodity and the factors that influence them are unique, trying your hand at multiple commodities can get you into trouble. Therefore, before you go out for intraday commodity training, pick just a couple of commodities and stick with them throughout.
2. Pay attention to global news
Now, once you’ve picked out the commodities that you would like to trade in, the next step is to read up on the news, both domestic and global, that can influence the price of these commodities. For instance, if you’re planning to start commodity intraday trading with crude oil, you should ideally keep yourself abreast of all the developments that happen in middle-eastern and OPEC countries.
3. Be aware of correlation between asset classes
There are many commodities that enjoy both positive and negative correlation with other assets. For instance, gold and the U.S. Dollar has a negative correlation. What this essentially means is that when the U.S. Dollar strengthens, gold weakens and vice versa. Getting into commodity trading, armed with this knowledge can help you go a long way.
4. Understand monsoon data
The price of agricultural commodities like paddy, maize, chana, and others are heavily dependent on the monsoons. A less than ideal monsoon season could spell a bad harvest, which in turn will reduce supply and lead to an increase in the price. The converse is also true. So, before you start intraday commodity trading, it is advisable to be aware of the monsoon data and outlook.
Now that you’re aware of how to trade intraday with commodities, why don’t you go ahead and give it a shot right away? That said, keep in mind that you would need a trading and demat account to participate in commodity trading. If you don’t have one already, get in touch with Motilal Oswal. You can open one for free within just a few minutes.
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