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Commodity trading – how to do commodity trading?

Commodity trading is generally done in two ways. You can do physical business where materials are moved from point A to point B and bought and sold in a physical sense. Another option is financial trading, which traders in trading exchanges carry out. This means that traders buy goods and then sell them for profit and profit. The most popular commodities are oil, gold, and base metals. In the financial world and the investment arena, commodity markets are under stress because they are important places for traders and investors to trade commodities, just as they trade stocks. Also, online platform is very good and easy way to learn how to do commodity trading.

How does the commodity market work?

A commodity market is an environment where one can buy, trade, and sell raw materials. Goods are divided into two classifications: hard and soft. Hard commodities are natural resources that must be mined, such as gold, silver, and oil. Soft goods include agricultural products and livestock such as corn, coffee beans, sugar, and palm oil.

As the demand for goods and services increases, so do the prices of goods, and goods are no exception. Economic booms and busts, natural disasters, and investment interest are just some of the factors that can determine demand. Investors gain access to available goods by investing in companies that sell those goods. These types of funds increase the diversity of an investor’s financial portfolio.

Commodity trading takes place in two arenas: the spot market and the derivatives market. The spot market, also called the cash market, deals in physical commodities themselves. Participants pay and receive these products immediately. In contrast, the derivatives market involves a lot of trading in contracts, especially futures.

If you want to know how to do commodity trading online, visit our website for more information.

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Table of Contents

• Beware of fixed/guaranteed/regular returns/ capital protection schemes. Brokers or their authorized persons or any of their associates are not authorized to offer fixed/guaranteed/regular returns/ capital protection on your investment or authorized to enter into any loan agreement with you to pay interest on the funds offered by you. Please note that in case of default of a member claim for funds or securities given to the broker under any arrangement/ agreement of indicative return will not be accepted by the relevant Committee of the Exchange as per the approved norms.
• Ensure that pay-out of funds/securities is received in your account within 1 working day from the date of pay-out.
• Be careful while executing the PoA (Power of Attorney) – specify all the rights that the stock broker can exercise and timeframe for which PoA is valid. It may be noted that PoA is not a mandatory requirement as per SEBI / Exchanges.
• Register for online applications viz Speed-e and Easiest provided by Depositories for online delivery of securities as an alternative to PoA.

• Do not keep funds idle with the Stock Broker. Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days. Please note that in case of default of a Member, claim for funds and securities, without any transaction on the exchange will not be accepted by the relevant Committee of the Exchange as per the approved norms.

• Check the frequency of accounts settlement opted for. If you have opted for running account, please ensure that your broker settles your account and, in any case, not later than once in 90 days (or 30 days if you have opted for 30 days settlement). In case of declaration of trading member as defaulter, the claims of clients against such defaulter member would be subject to norms for eligibility of claims for compensation from IPF to the clients of the defaulter member. These norms are available on Exchange website at following link: NSE, MCX

• Brokers are not permitted to accept transfer of securities as margin. Securities offered as margin/ collateral MUST remain in the account of the client and can be pledged to the broker only by way of ‘margin pledge’, created in the Depository system. Clients are not permitted to place any securities with the broker or associate of the broker or authorized person of the broker for any reason. Broker can take securities belonging to clients only for settlement of securities sold by the client.

• Always keep your contact details viz. Mobile number/Email ID updated with the stock broker. Email and mobile number is mandatory and you must provide the same to your broker for updation in Exchange records. You must immediately take up the matter with Stock Broker/Exchange if you are not receiving the messages from Exchange/Depositories regularly.

• Don’t ignore any emails/SMSs received from the Exchange for trades done by you. Verify the same with the Contract notes/Statement of accounts received from your broker and report discrepancy, if any, to your broker in writing immediately and if the Stock Broker does not respond, please take this up with the Exchange/Depositories forthwith.

• Check messages sent by Exchanges on a weekly basis regarding funds and securities balances reported by the trading member, compare it with the weekly statement of account sent by broker and immediately raise a concern to the exchange if you notice a discrepancy.

• Please do not transfer funds, for the purposes of trading to anyone, including an authorized person or an associate of the broker, other than a SEBI registered Stock broker.

• Do not deal with unregistered intermediaries (who are not registered with SEBI/Exchanges).

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