What is Commodity Market?

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What is Commodity Market?
A place where all primary products are exchanged
is known as commodity market. This market
includes direct physical and derivatives trading
as a form of spot prices, futures and options,
forwards. Before start investing in commodity
market investor should have complete basic
knowledge on it.
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• Commodity Market the basic point is that it
  deals in economic sector rather than manufactured
  products.
• Mainly there are two type of commodities soft
  commodities and hard commodities.
• In Soft Commodities agriculture product comes
  like wheat, cocoa, sugar, coffee.
• In hard commodities include mined like gold and
  oil.

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• The Government of India permitted initiation of
  National-level Multi-Commodity exchanges in the
  year of 2002 -2003 and according to this
  following exchanges have come into picture. They
  are
• Multi-Commodity Exchange of India Ltd, Mumbai
  (MCX).
• National Commodity and Derivatives Exchange of
  India, Mumbai(NCDEX).
• Indian Commodity Exchange (ICEX)
• National Multi Commodity Exchange,
  Ahmadabad(NMCE).
• This commodity exchange is regional commodity
  exchanges and also functioning all over the
  country.

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Hedging Against the exposure towards physical
trades -for risk management. Speculation Having
no exposure in physical form.  
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Now the point comes in every new trader mind How
to trade in commodities Investors trade in
commodities in the form of indexed futures
contracts.
Futures contracts It is a systematize contract
which amounts to an agreement to sell or buy a
specified capital of standardized quality and
quantity at a specified future date (which is
known as the contracts expiry date) at a cost
agreed today (the futures price).
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One of the most important factors in this market
is commodity indices?
Commodity Index is a exact or average of selected
commodity prices. This may be based on future
price or spot price. Basically spot price of a
particular commodity is current prevailing market
cost of that commodity being quoted for immediate
settlement. The purpose of design commodity
index is to representative of the board commodity
capital class, subset of commodities like metal
or energy and to track an individual single
commodity like gold.
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