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WHAT MECHANISM FOLLOWED BY INDIAN COMMODITY MARKET

 06 May 2018

WHAT MECHANISM FOLLOWED BY INDIAN COMMODITY MARKET 

Someone might have said to you that online commodity trading will make your rich in no time. However, it is not as simple as that. If you really want to start earning a profit in commodity market then you would first need to understand the mechanism which is being followed by the Indian commodity market. It is only after which you will need to understand how to understand and learn where to invest and where not to invest. People have said to lose everything in the stock market and these were mostly the experienced people/ you cannot simply enter into the trading world without knowing about the whole thing.

So, basically, there are a lot of things that need to be understood well before you start investing your hard earned money in the online commodity market. There is no guarantee that you will earn profits every time you invest your money. It completely depends on your knowledge, the market and to some extent on your luck. If all these factors favour you, you will then be able to make money out of investing in the stock market.

HOW THE ONLINE COMMODITY MARKET WORKS?

The Indian commodity market has indeed one of the most complex mechanisms following which a person making profits gets the money delivered to his account. The process of online commodity trading begins when an investor invests his money by buying the shares of a particular company and selling it back at the right time. When one sells his shares back, the profits earned is delivered to his account. And if the person loses his money in the transition, the money is debited from his account automatically.

This whole process in Indian commodity market is called Trading Cycle.

TRADING CYCLE

The trading cycle of Indian commodity market can be broadly classified into three categories:

•    Trading

•    Clearing

•    Settlement

TRADING

It is the process when a person invests his money in a particular company by buying the shares of the company. An experienced investor tends to invest in only those company which has a great track record in past and has a huge potential in future. Understanding these basic facts of online trading will help an investor to earn profits by selling the commodities back into the market also known as commodities exchange to earn profit. The trading process gets complete when the investor confirms his order and the money get debited from his account.

CLEARING

Clearing is the process where an institution acts as a mediator in between the buyer and the seller in order to maintain the authenticity of the transaction. The two such clearing houses in India are National Securities Clearing Corporation (NSCCL) managed by National Stock Exchange (NSC) and the other one is Clearing House (CH) managed by Bombay Stock Exchange (BSE). The clearing process involves a mediator to avoid any kind of fraud or malpractices between the buyer and the seller. These clearinghouses ensure that an investor gets his part of shares while the company gets their money. The money is never transferred directly from an investor’s account to the company’s account.

SETTLEMENT

It is basically a part of the clearing process. When the complete transaction of the money and shares takes place efficiently, the clearinghouses then gives go-ahead for settlement. A settlement is only done after ensuring all the obligations of both the parties.

The tasks which are performed by clearinghouses during the settlement process are:

1.    Clearing all the trades.

2.    Ensuring pay-ins, if the shares are sold by the investor.

3.    Ensuring pay-out, if an investor buys shares from a company.

4.    Checking for any frauds or risks.

INVESTING IN COMMODITY MARKET

Now that you have learned how things are managed in the commodity market, you will now need to learn what you will need to do on your behalf. If you really are interested in online trading in commodity market, the first thing you will need to do is get in touch with a broker. Since the Indian stock market regulators do not allow an individual person to invest in the market hence you will need a broker to do so.

The brokers usually are the ones who are licensed and registered with the regulatory authority i.e. Securities and Exchange Board of India (SEBI). Once you register yourself with a broker, you can then trade freely in the stock market. Just remember to approach only those brokerage firms who have years of experience in online trading in the commodity market. In this way, you will be able to access their full support and guidance if necessary.

Or if you do not want to approach any private firm you can go with the banks. All the banks in India are registered under SEBI hence there is nothing that you need to worry about. After learning the basics and acquiring the knowledge, you are good to go ahead for commodity exchange to earn profit.

READ ALSO5 Ways & Tips To Make Money In Online Commodity Market

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