Risk Management and Trading in Commodities

Commodities market present an alternative venue for traders which offers an opportunity to deal in commodities of different types including metals, energy resources, agricultural products and livestock. There are a number of commodity exchanges through which trading in commodities market is carried out. These commodity exchanges include National Commodity & Derivatives exchange Ltd. (NCDEX) and Multi-Commodity Exchange (MCX) and these exchanges are in turn regulated by the Forward markets Commission.

When trading in commodities, one should have a good understanding of the price behavior of a certain agricultural or non-agricultural commodity to be able to buy at a reasonable price and sell for higher to make good profits. Agricultural commodities have to be studied from the point of view of seasonal patterns, amount of rainfall or its scarcity and other relevant factors which can directly impact the prices of such commodities.

Those who do not wish to trade in commodities in their physical form, commodity derivatives present an attractive option for traders. Traders with physical possession of goods can also hedge through commodity futures to minimize the amount of risk faced due to changes in price levels of commodities, which works as an affective risk management tool. http://www.ashlaronline.com/