Commodity market, its regulations and Mcx Tips

Commodity market is being divided into two major groups; they are differentiated on the basis of the mode of trading that is the physical trading where the metals are actually bought and sold and are also immediately being delivered. Whereas the other group is the derivative trading where the products are being traded in the future contracts, where the date of delivery is decided upon for a future date.

Commodity market has been a center of attraction for the traders since ages and the growth of the market depends upon two of the major factors:

Liberalization brought about in capital and commodity market.

Introducing derivative market as a new financial tool.

Regulations of commodity market

Future contracts for commodity trading that are derivatives are being guarded by the three bodies of the system which are:

a)     Government of India.

b)     The commodity exchange.

c)     Forward market commission.

Government of India regulates various parts and practices of commodity market, they economic conditions also effect a lot on the movement of various products of the commodity market.

The commodity exchange has shown remarkable growth from the time of inception of the market. Now there are about 22 commodity exchanges in India amongst which 3 are of national level commodity exchange, which are NMCE 2000 (National Multi-Commodity Exchange of India Ltd), MCX :2003 and NCDEX: 2003.

Forward market commission is for protecting the interest of the customers and non members. It is for safeguarding the integrity of the financial market.

There are many types of derivatives which are considered to be important from the trading point of view:

Forwards, futures, options and swap

Forwards: It’s an agreement between two parties over the counter for the exchange of products/goods at a set price. The forwards vary from another in terms of contract size, expiration date and asset type.

Futures: Futures are legalized contracts between buyers and sellers.

Options: Option is a type of derivative where one party gives another party a right of buying or selling.

Swap: It’s an exchange of cash flow for a set period of time between two parties.

The technical team analyzes the movement in the market and studies the trends of the market for the future contracts. The MCX tips are analytically evolved and given in the market for trading in the market. Derivative market has become a very competitive place for traders to trade, for the following reasons

Risk Management: derivative trading reduces the risk and increases the interest holding the assets. It helps in identifying the desired and actual level of risk and then changing the actual level to desired level of risk.

Increases Liquidity: Derivative market trading helps in increasing the liquidity of the products. This helps the traders to trade the underlying assets and financial products more readily. Derivatives also decide the consumption and production decisions, this helps in proper division of the resources.

Commodity market has evolved as the best place for earning profit for the experienced and novice traders. The commodity tips helps in doing this provided by the experience of the research analyst who are watching the market since ages.