Whether you are a new investor or have been in the market for a few years now, certain questions about some securities other than stocks, bonds, etc., remain unanswered. Well, not anymore! If you want to know what other options you have aside from the stock market, there is commodity trading and forex trading. However, since they are not the same as your stock market, let’s look into each of them and understand them better.
Published on 01 March 2023
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What is Commodity Trading?
Commodity trading, in the simplest sense, is the purchase and sale of commodities in a dedicated market called the commodity market. It is the exchange of various assets, mainly futures contracts, that are based on the price of an underlying commodity. The underlying assets are physical commodities such as -
Gold, silver, zinc, copper, and more.
Coal, steel, bauxite, iron ore, etc.
Chemicals, earth metals, and others
Natural gas, crude oil, thermal coal, etc.
Oil services, mining services, etc.
Grains, oilseeds, pulses, spices, and more.
There are about 50 commodity markets globally that deal in 100 commodities. Therefore, as an investor or trader, if you are seeking to diversify your portfolio, an investment in the commodity market may help you.
In India, the commodity market is active for more than 12 hours, opening at 9:00 AM on weekdays and closing at 11:30 PM. The market is closed on public holidays as decided by the exchange.
What is Currency or Forex Trading?
Forex market trading involves trading in different currency pairs. As this market is the largest financial market globally, entities such as investment first, banks, hedge funds, forex brokers, etc., are the participants of forex market trading. The prices of the currencies are determined by factors like demand, supply, inflation, political and economic events around the world, etc. In India, you can only trade in the following currency pairs –
The forex market is open for forex investment 24 hours a day and five days a week. However, this timing is split into various sessions across the global time zone to accommodate trading in different locations.
Differences between Commodity Trading and Forex Trading
As evident from the descriptions, there are clear differences between commodity trading and forex trading. However, these are some more differences that you should know about –
Points of Distinction
Commodity Trading
Forex Trading
Regulated by
Securities and Exchange Board of India
Securities and Exchange Board of India and Reserve Bank of India
Traded on
The Multi Commodity Exchange of India, the National Commodity & Derivatives Exchange Limited and the National Multi-Commodity Exchange that has been merged with the Indian Commodity Exchange Limited.
The Bombay Stock Exchange, the National Stock Exchange and the Metropolitan Stock Exchange of India Ltd.
Exchange limits
Since commodities are traded on an exchange, there are limits on commodity exchanges.
Currency is traded over the counter, and so, there are no exchange limits.
Leverage
The leverage in commodity trading is lesser as compared to forex trading.
There is a higher amount of leverage in the forex market, and is easier to fulfil.
Influenced by
Commodity markets are influenced by weather, geopolitics, demand and supply, trade regulations, etc.
Currency markets are influenced by geopolitical events and macroeconomics.
For a very long time, though commodity trading and forex trading did not receive the importance they deserved, the situation is changing now, thanks to the global trends that support these markets. In fact, both markets provide lucrative exposure to investors and traders in their own ways. Also Read: Equity vs Commodity Trading
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Yes, the forex market is regulated jointly by the SEBI and the RBI; however, the commodity market is even stringently regulated.
There is no denying that commodities carry quite a bit of risk as they are a volatile asset class. However, those who are familiar with the commodity market know how to deal with the risks and learn to at least mitigate them since eliminating these risks is not possible.
You can trade commodities and forex on a futures exchange; however, it is not possible to trade commodities in the currency or forex market.
In the market, leverage refers to the capacity of utilising borrowed funds to increase your account balance, profit margins and the size of your trades through the investment. While forex trading enables flexible leverage, the same cannot be said for commodity trading.
As an investor or trader, you can choose which commodities you want to invest in based on the commodities of your choice and your risk tolerance. It is safe to say that you can choose natural gas, energy, gold and wheat to start with.
Yes, the forex market is regulated jointly by the SEBI and the RBI; however, the commodity market is even stringently regulated.
There is no denying that commodities carry quite a bit of risk as they are a volatile asset class. However, those who are familiar with the commodity market know how to deal with the risks and learn to at least mitigate them since eliminating these risks is not possible.
You can trade commodities and forex on a futures exchange; however, it is not possible to trade commodities in the currency or forex market.
In the market, leverage refers to the capacity of utilising borrowed funds to increase your account balance, profit margins and the size of your trades through the investment. While forex trading enables flexible leverage, the same cannot be said for commodity trading.
As an investor or trader, you can choose which commodities you want to invest in based on the commodities of your choice and your risk tolerance. It is safe to say that you can choose natural gas, energy, gold and wheat to start with.
Sharekhan Comtrade Private Limited (TM) operates the web site accessible from the URL www.myespresso.com (the “web site”').
Sharekhan Comtrade Private Limited is committed to protecting your privacy and utilising technology that gives you the most powerful, safe, online experience that you can get anywhere else.
Sharekhan Comtrade Private Limited does, however, gather certain information that is provided by you to the Web Site. Sharekhan Comtrade Private Limited believes that by collecting this information Sharekhan Comtrade Private Limited is able to provide you with a personalised web experience, and to assist its own sales team and advertisers in efficiently reaching an appropriate audience.Sharekhan Comtrade Private Limited does, however, gather certain information that is provided by you to the Web Site. Sharekhan Comtrade Private Limited believes that by collecting this information Sharekhan Comtrade Private Limited is able to provide you with a personalised web experience, and to assist its own sales team and advertisers in efficiently reaching an appropriate audience.
Sharekhan Comtrade Private Limited requests the minimum information it believes necessary to achieve this goal.
The following discloses Sharekhan Comtrade Private Limited's information gathering and dissemination practices for the Web Site:
System Data:
Sharekhan Comtrade Private Limited uses your IP address to help diagnose problems with our server and to administer the web site. Your IP address is used to identify you and your shopping cart and to gather broad demographic information.
Registration Data:
The Web Site's registration form may require users to give us contact information (like their name, phone number and e-mail address), unique identifiers (like their PAN Number) and demographic information (like their pin code, age or income level). The Web Site uses customer contact information from the registration form to send the users information about Sharekhan Comtrade Private Limited and promotional material from some of Sharekhan Comtrade Private Limited's partners. The customer's contact information is also used to contact the visitor when necessary. Unique identifiers (such as PAN numbers) are collected to verify the user's identity. Demographic and profile data is also collected at the Web Site. We use this data to tailor the visitor's experience at the Web Site, showing them contents that we think they might be interested in, and displaying the contents according to their preferences. This information is shared with advertisers on an aggregate basis.
Links and Co-Branded Sites:
This site contains links to other Web Sites which are not necessarily been screened or reviewed by www.myespresso.com. Sharekhan Comtrade Private Limited is neither responsible for the privacy practices or the contents of such Web Sites nor shall be held answerable for the inaccurate, inappropriate or offensive data, material, information, products and services that may be viewed on those sites.
Sharekhan Comtrade Private Limited may operate a number of co-branded sites. Policies regarding information collection and sharing may differ on some of these co-branded sites. If you have any particular questions, you should check the privacy statement that appears on each co-branded site.
Order Forms:
The Web Site uses an order form for customers to request information, products and services. The Web Site collects visitors' contact information (like their mobile number or e-mail address), unique identifiers (like their PAN number) financial information (like their account or credit card numbers) and demographic information (like their pin code, age or income level). Contact information from the order form is used to send orders, information about Sharekhan Comtrade Private Limited, and promotional material from some of Sharekhan Comtrade Private Limited's partners to the visitors of the Web Site. The visitor's contact information is also used to get in touch with the visitor when necessary. Financial information that is collected is used to check the users' qualifications and bill the user for products and services. Unique identifiers (such as PAN numbers) are collected from Web Site visitors to verify the user's identity.
Surveys and Contests:
The Web Site's online surveys ask visitors for contact information (like their mobile number or e-mail address) and demographic information (like their pin code, gender, age or income level). The Web Site uses contact data from its surveys to send the user information about Sharekhan Comtrade Private Limited and promotional material from some of Sharekhan Ltd.'s partners. The customer's contact information is also used to contact the visitor when necessary. Users may opt-out of receiving future mailings; see the choice/opt-out section below. Demographic and profile data is also collected at the Web Site. The Web Site use this data to tailor its visitor's experience at the Web Site, showing them content that it thinks they might be interested in, and displaying the content according to their preferences. This information is shared with advertisers on an aggregate basis.
Sharekhan Comtrade Private Ltd run contests on the Web Site in which we ask visitors for contact information (like their e-mail address). Sharekhan Comtrade Private Limited uses contact data from its contests to send users information about Sharekhan Comtrade Private Ltd. and promotional material from some of our partners. The customer's contact information is also used to contact the visitor when necessary. Users may opt-out of receiving future mailings; see the choice/opt-out section below.
Third-Party Advertisement Servers:
Sharekhan Comtrade Private Limited engages the services of an outside advertisement company to display advertisement on the Web Site. These advertisements may contain cookies. While Sharekhan Comtrade Private Limited uses cookies in other parts of the Web Site, cookies received with banner advertisements are collected by the Advertisement company, and Sharekhan Comtrade Private Limited does not have access to this information.
Protection of your Data and Information:
The privacy and protection of your data and information provided to us is of vital importance. Sharekhan Comtrade Private Limited shall ensure to safeguard the security and confidentiality of any information you share with us. Any personally identifiable information of the customers obtained by us shall not be used or shared other than for the purposes to which the customers consents. However security and confidentiality of information cannot be guaranteed cent percent. Hence despite our utmost efforts to protect your personal information, Sharekhan Comtrade Private Limited and www.myespresso.com cannot warrant the security of any information you transmit to us through our online services. Such transmission of your personal information is done at your own risk.
Disclosure of Customer Information :
Sharekhan Comtrade Private Limited and www.myespresso.com shall not deliberately disclose customer's personally identifiable information to any unauthorized third person, save and except where such information shall be disclosed in good faith and for the purpose of law for the time being in force or to protect the rights and property of Sharekhan Comtrade Private Limited and www.myespresso.com.
Public Forums :
The Web Sites makes chat rooms, forums, message boards and/or news groups available to its users. Please remember that any information that is disclosed in these areas becomes public information and you should exercise caution when deciding to disclose your personal information.
Supplemental Information :
The Web Site supplements the information that you provide with information that is received from third parties.
The Web Site DOES NOT entice by the prospect of a special game, prize or other activity, to divulge more information than is needed to participate in the activity.
Further to the above, in light of the recently notified Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011. (Hereinafter referred to as the Rules)
The following shall be deemed to be sensitive information :
Password;
Financial information such as Bank account or credit card or debit card or other payment instrument details;
Physical, physiological and mental health condition;
Sexual orientation;
Medical records and history;
Biometric information;
Any detail relating to the above clauses as provided to body corporate for providing service; and
Any of the information received under above clauses by body corporate for processing, stored or processed under lawful contract or otherwise:
provided that, any information that is freely available or accessible in public domain or furnished under the Right to Information Act, 2005 or any other law for the time being in force shall not be regarded as sensitive personal data or information for the purposes of Rules.
Collection of Information:
Compliance with KYC guidelines as per SEBI / Exchanges / Or any other Act, law or regulation requiring the same and any internal KYC guidelines formulated by Sharekhan Comtrade Private Limited.
In order to provide enhanced trading experience to the client.
In order to provide any further information to be provided to regulators.
Such information may be collected in a manner that the client is always aware of the collection and purported usage of the same. The client shall have an option to withdraw consent to share the information. However such intimation shall be required in writing. Such intimation shall only be taken into account from the date on which the same is received. Sharekhan Comtrade Private Limited may choose to stop services to such a client in case such intimation is received. Such information shall only be used for the purpose it is collected.
Clients would be allowed an option not to disclose any information to be collected, provided the same is in compliance with regulatory requirements.
Disclosure of information:
Disclosure of sensitive information would be as per the terms agreed by the clients. For any change in such terms, the clients would be informed.
Provided no consent may be required in case the same is being shared as per compliance guidelines or as required by regulators.
Any information being disclosed to third parties would be in accordance with the Rules and would be done provided such third party has the same level of compliance guidelines as Sharekhan Comtrade Private Limited.
Sharekhan Comtrade Private Limited shall allow clients to review their personal information and the same shall be allowed to be edited provided exchange guidelines relevant to the same are followed.
Sharekhan Comtrade Private Limited shall maintain reasonable security practices and procedures and maintain a comprehensive documented information security programme. In the event of an information security breach, Sharekhan Comtrade Private Limited or a person on its behalf shall be required to demonstrate as and when called upon to do so by the agency mandated under the law, that there have implemented security control measures as per their documented information security programme and information security policies and information security policies that contain managerial, technical, operational and physical security control measures that are commensurate with the information assets being protected with the nature of business.
KYC Languages
Download Client Registration Documents (Rights & Obligations, Risk Disclosure Document, Do's & Don't's) in Vernacular Language :
Note: "This document is a translated version of the client registration documents in English and is being provided in vernacular language to facilitate better understanding by the investors. In case of any ambiguity, the contents of the English version would prevail."
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