The economic market offers a plethora of opportunities to make gains on trades. In addition to stocks, online commodity trading can be a great way to diversify your portfolio. However, is it good for beginners?
The answer is- yes if you have the necessary conceptual knowledge. However, remember that becoming a successful commodity trader means weighing your options available and choosing the best one. Let us first discuss the concept before understanding why it is suited for beginners.
What is Commodity Trading in India?
Commodities are raw materials that have their own intrinsic value that can be exchanged for other items. There are four major types of commodities tradable in India- metal, agricultural products, energy and livestock and meat. The value of commodities is directly related to the forces of demand and supply.
Commodities are listed on major Indian exchanges such as National Commodity and Derivatives Exchange (NCDE) and Multi Commodity Exchange (MCE).
While commodities can be traded in the physical world too, it is usually traded in terms of futures and options contract. Commodity F&O trading is available through reputed trading platforms such as Dhan, where you can trade in any commodity.
Commodities are a promising concept for traders, but is it good for beginners? Let’s find out.
Why Choose Commodities for Online Trading?
After understanding what exactly constitutes commodity trading, here are 5 reasons why a beginner can trade commodities to enhance his/her portfolio.
1. Leverage
New traders can increase their revenue by obtaining margin leverage for their commodity trade. You can pay a margin percentage to obtain a significant stake in terms of commodities. Thus, even a small upward movement in price can boost your gains.
While the margin requirements vary depending on the commodity, it is still lower than the margin on equities and ETFs.
2. Transparency
The commodities market in India is evolving every day. We have come a long way from physical trades. Smart online trading platforms such as Dhan provide a live market scan, trading charts and an efficient dashboard in a clean interface, thus improving transparency between the broker and the trader.
3. Diversification
If you are a beginner in the trading world, you might want to diversify your portfolio to distribute the risk. Commodities are a great asset for portfolio diversification. A good rule of thumb is to allocate 20% of your portfolio to securities with a greater risk/reward category, such as commodities.
4. Protection
Most traders head towards commodities when markets are in turmoil. Therefore, a beginner can trade in commodities to protect themselves from stock market dips or inflation. The cost of raw materials increases at the time, thus driving the price of commodities.
5. Easy Trading
Most traders, both old and new prefer easy trading. There is no minimum trading amount while trading commodities. Thus, you can get started even with a little capital. You just need to create a commodity account and you are all set to trade commodities.
Conclusion
Commodity trading involves trading raw materials such as metals, energy, agricultural products, livestock and meat. They are less volatile when compared to equity trading and are suitable for well-researched beginners. Online trading platform like Dhan provide the ability to trade commodities as derivatives.
Disclaimer: This article contains sponsored marketing content. It is intended for promotional purposes and should not be considered as an endorsement or recommendation by our website. Readers are encouraged to conduct their own research and exercise their own judgment before making any decisions based on the information provided in this article.
