Commodity Trading Account

Currently the stock market and exchanges have seen a windfall in trading activity. This is in accordance with the fact that the number of Demat accounts in the country have increased multifold in the past year alone, and this is testament to individuals trading in stocks and other assets. With the recent inflow of funds in the stock market of India, India has earned a top spot among the ten most popular stock markets in the world. Having said all this about stocks being the ‘go-to’ assets for investors today, commodity trading has seen significant momentum with Indian investors. Continuing to play a pivotal role in the Indian financial arena, trading in commodities represents trading a group of assets or goods. Such assets and goods are the products we use in our daily lives. These include gas, coal, gold, coffee, silver, etc. Put simply, commodity trading is all about the purchase and sale of such products to earn profits.

Trading in commodities is a savvy way for investors to diversify financial portfolios. Related to the concept of commodities trading is derivatives trading in the stock market and exchanges. Derivatives represent financial securities of which values/prices are largely determined by underlying assets. These assets could well be stocks, currencies, bonds, commodities, etc. As the prices of commodities have shifts and movements that are different from stocks, traders and investors make use of trading in commodities as a countermeasure to ward off inflation and its effects. Commodity trading is not such a novel concept as it may seem. Trading in commodities has, technically, existed since ancient eras. This is because basic trading and bartering of goods has prevailed for decades. Merchants have always been involved in the exchange of goods to make gainful profits or raise the value of assets. Furthermore, the term ‘profit margin’ is not new in the current world of trading and has been around for centuries. Nonetheless, with the creation of the stock market and exchanges and its constant evolution, trading in commodities has changed into a form of selling and buying that is more professional. Earlier, individuals could buy commodities and store them in a physical fashion, but now these are traded on exchanges.