Let’s understand what are the various types of commodities trading we can choose to invest in. If you want to start investing in commodities market, we need to understand exactly what a commodity is and what choices of commodities are available for us to invest in.
So firstly, let us discuss what commodities are. In general, commodities are goods, which originate from nature and are uniform in their usage. So what does this mean? Suppose we show you two different bags of cottons. By simply looking at the bags, you will not be able to determine which cotton is better or which cotton comes from a reputed brand. This is a unique feature about the commodities, which separates it from the rest of the products in the market. Some of the examples of commodities are crops, oil, metals etc.
Now commodities, are mainly classified into two types based on their sources, which is the hard commodities and the soft commodity. So, what are the hard commodities? They are those which have to be mined or drilled from the earth to be procured. Examples are precious metals, industrial metals, crude oil, and natural gas.
On the other hand, soft commodities are those which have been grown on earth to be procured some examples are crops, livestock and fibers. When we step out to find suitable investments, commodities trading are usually grouped into major categories based on their industries. For example, all crops come under agricultural commodities and crude oil and gasoline are a part of energy commodities.
In India, the categories which are available include agricultural products, ferrous metals, non-ferrous, metals, fibers, pulses, energy products, and spices among others. Another special type of commodity traded in many markets around the world is the bullion. This refers to the gold or silver, which has proven to be at least 99.5% pure. And it is kept in the form of bars.
In India only the golden and silver bullion are traded in the commodity market. With this. We have covered the essential types of commodities we can invest in. Before trading in commodities, one should always ensure to thoroughly understand the factors that would impact the prices of a particular commodity.
In case you are a fresher do take assistance of the market experts or the full-service brokers to help you in understanding and monitoring the commodity market.
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