What is the online commodity market and how does it work? How can you start trading in the online commodity market and making money? These are some of the most mind hitting questions we receive from stock market beginners. In this article, we’ll try to cover answer those questions and provide you with a step-by-step guide on how to start trading online commodities yourself!
Let’s start with the basics.
The online commodity market, as the name suggests, is just another type of market — like a food market where you buy meat and fish! The only difference is that in the commodity market, people buy and sell metals like Gold, Silver, Aluminum, Zinc, Copper, Nickel and many more. Yup, that’s right! In the online commodity market, you can become asub broker franchiseof the biggest commodity broker in India’s.
You might be wondering, “How can a regular person afford to buy such big amount metals? Isn’t that expensive?” Well, it is! That’s why commodities are divided into products before being sold. Just like how you would cut a calzone into slices to make it easier to eat, commodities are divided into metals to make it easier for people to buy.
Okay, so how can you make money with commodities?
Once you’ve bought metals like Gold, Silver, or other commodities you can make money in 3 ways: through understand physical commodity transactions or buy or sell physical commodities, store your physical commodities. Know how to open a trading account
Commodities are raw materials, agricultural products, petroleum products, and industrial and precious metals. Physical commodities are bought and sold in bulk for immediate delivery in specialised markets around the world. These markets are known as the “spot” or “cash” market. The majority of participants in the spot market are producers, and users of the commodity, able to finance and store large amounts of a commodity such as a refinery buying crude oil or a flour miller buying wheat and corn. As a consequence, individual investors rarely purchase any physical commodity except precious metals like gold, silver, platinum. or palladium. An individual taking delivery of a physical commodity must be prepared to:
• Pay a premium over the spot price, whether purchasing coins or bullion. Premiums can range up to 25% of the spot prices.
• Pay cash for the total purchase price. If an investor wishes to leverage his purchase, he must find and negotiate with a private lender who is willing to accept the metal as collateral.
• Pay extra charges for storage and insurance to protect against theft.
• Assume the risks of illiquidity. Finding a buyer for a large amount of gold, for example, might be difficult and expensive.
Understand physical commodity transactions.
Commodities are raw materials, agricultural products, petroleum products, and industrial and valuable metals. Physical commodities are bought and sold in bulk for immediate distribution in specialized markets worldwide. These markets are called the “spot” or “cash” market. The majority of the participants in the spot market are producers, and consumers of the commodities, who can fund and store large commodities such as a refinery that buys crude oil or flour mill that buying wheat and corn. As a result, individual investors rarely buy any physical goods other than precious metals such as gold, silver, aluminium, silver or zinc. An individual who takes physical products must be prepared to:
• Pay a premium for the spot price, whether you buy coins or bullion. Premiums can vary by up to 25% of the spot prices.
• Pay cash for the total purchase price. If an investor wishes to leverage his purchase, he must find it and negotiate with a private lender who is willing to accept the metal as collateral.
• Pay extra payments for storage and insurance to protect against theft.
• Take the risks of distress. Finding a buyer for a lot of gold, for example, can be difficult and expensive.
Buy or sell physical commodities.
You can buy physical commodities by visiting specific websites or exchanges where they are sold. They are not available through standard brokerages. However, finding famous markets to buy it can be difficult. Look for well-known authorities to refer you to safe places to trade physical commodities.
For example, the World Gold Council holds a list of famous sites selling gold and bullion pieces.
Store your physical commodities.
There is a need to store physical commodities in safe places until they are sold. You can also buy insurance to protect you from losing a total if the goods are stolen. Both of them increase the cost to the investor and break into potential earnings.
Some gold selling companies offer secure storage for buyers.
Interested? Here’s how you can get started.
Step 1: Know what you’re getting into
Although you can make a lot of money through the online commodity market, you can also lose a lot of money if you don’t know what you’re doing.Online commodity trading is a skill, just like drawing or playing an instrument, so doesn’t expect to be a commodity market wizard right away. It will take time for you to develop your skills and learn how to trade commodities properly, so don’t put your life’s savings on the line unless you have tried and tested your strategies already. Commodity traders are not gamblers.
Step 2: Find a commodity broker
To invest in the online commodities market, you will need to contact a broker. In the country like India, the commodity market is regulated by the Board of Securities and Exchange of India (SEBI). The SEBI does not allow any individual to directly invest in the online commodities market. So you would need a broker to continue the process. A broker can be anyone, a person or a brokerage or bank provided that they will have to be registered with SEBI.
3. Decide how much you want to invest
Investing in the commodities market is a very dangerous thing to do. The losses occur in the commodity market the same as profits. It is a full-time job, analyzes and collects information about commodities. People have said to lose everything in the commodity market because they did not know when to stop investing. So, it’s a very important thing to understand that you need to be careful, especially if you are a beginner. This is the beginner’s guide to theonline commodity market.
4. Hire a financial advisor
Knowing about your shortcomings and understanding them at an accurate time is a crucial thing to do in the commodities market. If you are facing difficulties in understanding the process then you should be prepared to hire a commodity market advisor. There are some of the best and qualified professionals there to help you.
Step 5: Start trading!
After you have deposited the money in your trading account, you can start trading! But remember that this does not mean that you will make tons of money straight away. As you know if you have tried a commodity trading platform, commodity trading takes time and effort. You need to spend time and effort to analyze the market, refine your strategy, and constantly improve yourself if you want to succeed. The more you trade it, the better you understand yourself and what works for you — how much risk you can take, how often do you want to make a trade, how much money that you can afford to invest, etc.
Read in detail-How to Make the Profit in Intraday Trading