If you want to understand what is commodity trading in India first you need to understand:
what is commodity market and how it works
The commodity market is a market where traders buy and sell commodities. Commodities are raw materials or primary agricultural products. Commodities are simple goods and the manufacturing of goods that make up the basis of our food supply. The general public rarely understands why commodities traded on exchanges the main reason of that lack of knowledge in India people are not too much aware of the importance of commodity market.U.S. investors have been trading in the commodity markets for more than 180 years, and there are more than 1000 evidence its prove that commodity market its traded from many years ago.
Commodity Exchanges serve a vital role in the economy and it’s unlikely that the U.S. would have experienced as much economic growth in the last hundred years as it has without them.
The need for exchanges is to provide a centralized marketplace where commodity producers—the commercials—can sell their commodities to those who want to use them for manufacturing or consumption. The beauty of a commodity futures exchange is that someone like a corn farmer can lock in a price for his crops months before they’re even harvested. This process increases business survival among farmers, and the exchanges always make sure there’s a buyer for every seller, provided their prices meet. It is the greatest advantage of commodity market to avoid monopoly in the commodity market and enhance the transparency of commodity price in all over the world .and the people it’s aware of the prices of commodity what it’s their fair price and what impacts them most.
Fears about Speculators
In today world The speculators are trying to be on the majority of the trading on the commodity market, but the exchanges still serve the same purpose as they did a hundred years ago. They provide many more opportunities for producers and users to hedge their operations. Volatility in the commodity markets can create better pricing and hedging opportunities for the commercials and regulator always monitor the speculation activity so we don’t need to worry about speculation that impacts our decisions.
Some people might argue that speculators continue to cause commodity prices to rise to unnecessary extremes but in reality, that’s not possible because the commodity markets its to expand and transparent no one can manipulate their price and that’s a detriment to the profitability of their operations. In reality, there have always been arguments among speculators, commercials, politicians and the media when it comes to these issues. These conflicts will probably always exist, but the fact remains that the commodity exchanges as a whole benefits everyone.
The small speculator doesn’t need to be concerned about all the inner workings of the commodity exchanges. The main thing to realize is that there’s an efficient marketplace which offers opportunities to commercial hedgers as well as to speculators. It’s up to each individual how he wants to utilize the exchange. A speculator can bet on the price of a commodity moving up or down. Commodity exchange provides the facility to hedge your position by using a hedging strategy to ensure your profit in the market.