We all love to try and explore different fields so why not try a field that has so many interesting terms and can help an individual to earn a high income as well. That is why we have got you an article that has all the information about trading for beginners. But before we go into the details let us first understand the meaning and types of trade.
Trade involves the exchange of goods and services for money or other goods and it generally happens between different entities or countries. An early form of trade also known as the barter system involved the exchange of goods for goods. Modern traders have now started negotiating with money and reduced the exchange of goods. Trade is categorized into two parts namely, internal trade and external trade. Internal trade is concerned with purchasing and selling goods between different regions belonging to the same country or geographical location. Whereas external trade involves the buying and selling of goods between two or more countries. Various types of trade consist of-
Traders who have set up companies in the field after following all the legal procedures provide all these services.
Where to trade?
People can start investing in stock trading or can start their own business of import-export-trading once they learn the various benefits of it. Below mentioned are a few benefits-
- The trading platform is easy to use with no complicated steps at all.
- The platform also provides several educational materials to encourage learning among individuals.
- The trading platform also provides access to quality market research.
Beginners need to attend lectures, live seminars, webinars, and videos that explain the various terms of trading and also explain to you the best trading platform.
Agro-commodities profit margin
Trading in commodities mentions the future market in commodities. The agricultural commodities consist of elements like rice, sugar, wheat, spices, soybean, coffee, which are soft commodities. They also consist of hard commodities like metals like gold, silver, nickel, aluminum, etc.
The global commodity market is quite enormous and about three times the size of the equities trade market. The domestic commodity market is still in the first stage but is growing slowly and steadily and is expected to grow at an annual rate of 40 percent over the next few years.
The commodities market has two parts- spot market and futures market. In the case of the spot market, the commodities are purchased and sold on an immediate basis. The future date is also known as the expiry date and the fixed quantity is known as the contract size. The purchasing and selling of these futures takes place on commodity exchange. A commodity trader can use the futures market to ensure that they are protected against any adverse change in prices. The trader can enter into the futures market to purchase a certain quantity at a particular price and on a particular date and also be safe about the margins, because both their purchase and sale price is fixed.
There are special commodity changes involved in the futures market that include multi-commodity exchange (MCX), national commodities derivative exchange (NCDEX), national multi-commodity exchange, and many more. The minimum investment required is Rs.5000 and there are more than 42 traded commodities offered to the investors.
How to hedge against stocks?
Stock trading can be difficult when an individual owns stocks in a falling market. In such circumstances, closing out the trade will contain the loss but will also decimate the trading principal. But one can protect it by following the below-mentioned steps-
Invest in bonds as a conservative way to hedge the falling stock trades.
- Invest in bonds as a conservative way to hedge the falling stock trades.
- Purchasing bond fund shares can provide better hedging than one would get with individual bonds.
- Profit from falling stock prices and hedge the portfolio at the same time by purchasing put options.
- Consider investing in an inverse exchange-traded fund (ETF) to hedge the stocks.
- Buy a call option
- Sell an index commodity futures contract
Risk in agro trading
With the equity markets reaching new heights every day there is an equal risk attached to it. Hence, the traders and investors both have to take certain precautions in order to survive in the competition. The following risks can occur when trading in any commodities or stocks.
The prices of agricultural commodities are volatile and may change frequently depending on the weather conditions. If the conditions are favorable, the supply of commodities will be more and vice versa. This affects producers, manufacturers, consumers as well as traders of agricultural commodities.
Basis risk occurs when there is a hedging strategy execution and there is a difference between the spot and futures market prices.
Quantity risk depends on the number of products realized by a producer. If a producer expects high demand for a commodity, they may want to increase the grain output of a certain commodity or produce more of that grain.
The producer may be unable to sell the entire quantity at times and may have to sell it at a very low price which may result in a huge loss.
Commodities with higher volatility on exchanges expose to intense speculation and price manipulation that results in significant price changes and lead to huge profits or losses.
The bottom line
Start with your trading journey by learning all the important terms and getting involved in communities that discuss these topics. It will help you to gain a better insight of the topic and help you in the future. Apply the strategies and you will be settled in the business easily without any complications. A company that is doing it successfully for many years is PL Global which is an import-export trading firm specializing in all trading facilities of agro commodities. The team of experts consisting of more than 1000 employees with years of experience help their clients by providing the best facilities and the best service.
Contact PL Global Impex Pvt Ltd for the best agricultural commodities.