Gold and Silver

Trading Commodities - Why it can work for you!

In India, there is a very big misconception that trading commodities is gambling, thus earning it the nick name - FAATKA. Almost every trader at some point of their trading careers gives trading commodities a try and most of them leave it. In the end, very few people are able to make profits trading commodities. In this article we will focus on why commodities trading might work for you and not on details of commodity trading in India.

POSITIVES:

  1. Related to International prices -
    Prices of commodities like Gold, Silver, Crude Oil and base metals on the MCX are heavily dependent on price movements in the international markets. These markets are very liquid and too big to be manipulated. Also trading in this segment makes you track international markets and thus increases your scope of understanding. So all your fears of commodity prices being rigged should be kept aside.
  2. Timings -
    In India, commodities are traded majorly on MCX whose timings are 10 AM to 11:30 PM! The major moves usually come post 6:30 PM - 7 PM when the American markets open and news starts flowing in which effects the prices. Also, this is the time when the Rupee-$ trading has closed for the day and the moves are easy to analyse in relation to the international prices. So if you are a working professional or can't trade the equity markets actively during day time, commodity markets give you that flexibility to pursue your active trading career post your office hours.
  3. Easy to track -
    Unlike when trading equities, you just need to keep 3-4 commodities in your watchlist and track them. When trading equities you need to keep going through 100's of charts and sectoral data to find trade setups and opportunities.
  4. Powerful analysis tools for FREE -
    Just open a free demo account with any forex broker online and you get access to MT4/MT5 terminals with RT tick by tick data of international prices of Gold, Silver, Crude Oil which helps you predict price movements in Indian markets too. Even the Indian markets have started offering amazing tools for MCX real time prices. Check out our intraday charting software
  5. More trading opportunities -
    There is always some data from some part of the world which can impact commodity prices! One day it might be China, one day it might be Cyprus. So there will be trading opportunities with good moves almost everyday. Also, commodities tend do respect price levels more than stocks as they are more liquid
  6. Extremely low brokerage and break even points -
    Even trading multiple lots will cost you a flat fee if you trade through a discount broker. This means that for you to be profitable it will most probably be just a tick or 2. Check out our brokerage plans.
NEGATIVES:
  1. Abuse of leverage -
    We all must have heard tales of people getting wiped out trading commodities. It takes no mastermind to say that it is all due to abuse of leverage. We are approached by people who want 10-15 times leverage to trade commodities. So much leverage can wipe you out completely in minutes. Our youtube video details out what mistake every new trader is making in commodity markets. And mind it, your broker will never stop you from making this blunder. High leverage is a weapon of mass financial destruction. Stay away form it!
  2. Not all commodities are worth trading -
    In the Indian commodity markets, the agri commodities like Jeera, Potato, Cotton, Cardamom, etc are heavily controlled by big players and thus retail traders moving to this segment can end up being caught on the wrong side every single time. It's always better to stick to the international commodities and base metals.
  3. Advisory traps -
    Many traders fall into the traps of tip providers on social media with promises of "Operator news - 1000 point move in Silver". He will tell 50% of new clients to BUY and other 50% to SELL and win the trust and pockets of half of them and the ones caught on the wrong side would anyways be wiped out during the day itself. Stay away from such traps! Even USA is unable to control OIL prices, how can some fake id with a fake girl's dp sitting in India do the same. Say no to TIP PROVIDERS.
  4. Lack of money management rules -
    Commodity trading depends more on implementation of the trade than analysis. You need to be extremely careful in controlling your losses and most of the traders fail in this aspect. We cover this as part of our TA Course.
Before you start out trading commodities do decide carefully on the commodities you will trade. Most of the traders of have lost money trading commodities have similar traits and approach to this market. You just need to avoid those traits to emerge successful. If you want to know more about trading commodities, do feel free to contact us: raghav@dalalstreetbulls.com


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