Trading has many types. Commodity trading, for example, involves trading in the commodity market. It is a market that trades in primary economic sector rather than manufactured products or shares. Two kinds of commodities are involved while trading in this market: soft commodities and hard commodities. Soft commodities are agricultural products such as wheat, coffee, cocoa and sugar. Hard commodities include resources that are mined, such as gold and oil. Investors access about 50 major commodity markets worldwide with pure financial transactions increasingly outnumbering physical trades in which goods are delivered. Commodity markets can include physical trading and derivative trading using spot prices, forwards, futures, and options on futures. Farmers have used a simple form of derivative trading in the commodity market for centuries, for price risk management.
The commodity market is very volatile in nature, due to sudden rise and fall in prices of the goods involved. Therefore, one should take the following instructions into account in order to avoid any losses.
- Trade only through Registered Members
- Fill up a proper KYC form before you trade
- Fill up the Member-Client Agreement prior to commencing
- Get a copy of your KYC and Member-Client Agreement from the member
- Have a look at the Rules, Regulations, Circulars, etc. of the Exchange as well as of the Regulators, Government and other authorities to know your rights and duties as a trader
- Clear all your doubts with the Member before you start transacting
- Make sure you get the bill of every settlement
- Comply with all the accounting standards for the different kinds of derivatives
- Read and understand the voluntary clauses, if any, agreed between you and the Member. Sign only after the clauses are clear between both the parties
- Make sure you register your mobile number and email ID with the Member, for trade confirmation alerts and other information
- Please ensure that you have a documentary proof of having made the deposit of such money or property with the member, stating towards which account such money or property deposited
Once you have the above points taken care of, you can begin transacting at the commodities market without any issues. In case you need further help, you can always get in touch with Destimoney for advice and assistance.