Commodity investments tend to be much riskier than equities. Most of the traders who are not regular commodity traders believe that the prices of commodities often fluctuates so high that traders lost a big chunk of their investment within a day, and they are often correct. A very few traders are involved in commodity trading and willing to continue the trade in the segment.
However, risks in commodities tend to create profit-making opportunities. The potential for losses are great, but so are the possibilities for profit. Most of the trader who doesn’t have much idea about how to invest in share market resist themselves from investing in commodities without knowing about the perks it can offer. The main reason why commodities are risky is that they trade on futures, mostly, which offer a high degree of leverage. A commodity trader has to buy the shares with 10 to 20 percent of the rate value in futures, as a marginal value to control an investment in the total contract.
How to invest in share market
According to equity tips providers, a commodity trader lose his money in the segment just because he lacks the knowledge and he is not aware about the international prices of commodities and how the commodities are dependent on international markets. However, commodities fetch an investor a great deal of profit if invested wisely and with some proper guidance. A good profit is directly related to a few loss factors. In commodity trading, greater profit comes with the probability of a greater loss. Commodity investments take a small marginal amount to control the even larger amount.
The risks in commodities can be reduced to a minimum level by applying proper strategies and planning. The values of a commodity often fluctuate but an investor should never forget that they hold a great value in the capital market. Sooner or later, every commodity product gains the lost values and starts to grow, an investor just need to be patient and must have proper decision making. Many new traders do not educate themselves on how to trade commodities properly. This goes beyond the learning of futures margins and contract sizes of a variety of commodities. A new trader/investor is competing against other traders who have had the best training in the business and have been trading professionally for many years.
A young trader in the market must know about how important it is to have a trading plan in place before you begin trading in MCX commodity market. A well-structured trading plan is your assistance to how you will conduct your trading. It should be reviewed regularly. The trading plan should include the markets you will trade, your trading strategy, money management and even a plan to stop trading for a period of time if your account equity drops to a certain level.
Commodities are the most volatile asset class. It is not unusual for the price of a raw material to half or double, triple or more over a very short time.