Are liquid commodities safe to invest ??
Liquid commodities are traded on large scale by investors, traders, arbitragers in both cash and derivative market. Some of the commodities which are traders at huge volumes globally are crude oil, corn, natural gas, copper, gold. Also as commodity market is least correlated with other market’s traders have better opportunities of earning high returns here. MCX Tips of experts can help in earning profitable returns.Following are the most frequently traded liquid commodities:
1)Energy Commodities :
Energies like crude oil, natural gas are traded on large scale, with crude oil being the most actively traded commodity among all. Major traders of crude oil includes airlines, petrochemicals and oil refining companies.
For activities like manufacturing electronic goods, power generation and also for telecoms cable copper is used as raw material. This is one of the reason why copper is trader largely on exchange.
Apart from these commodities also gold is a leading commodity and is traded at high volume. Traders also trade in gold to hedge against inflation or periods of currency devaluation.
These are not among preferred commodities which are trader on exchange. But yes some agricultural commodities like wheat and corn are still traded on large scale.
Following are the trading techniques of liquid commodities :
1)Forward Contract :
Under this contract two parties a buyer and seller can enter to buy or sell the underlying commodity at a per-decided price and date. No initial investment has to be made for that. Also there might be situation where settlement between two parties is in the form of cash without giving the actually delivery to the buyer. Traders are expose to counter party risk here as there is no role of exchange in this contract.
2)Future Contract :
Future contracts are standardized forward contract and here traders are exposed to counter party risk as exchange act as an intermediary body between the buyer and seller. Also the necessities like margin money are fulfilled by both the parties to trade using this contract.
This contract enable traders with less capital and risk bearing capability to trade in liquid commodities. Traders can enter in this contract by paying the premium amount which give them right to exercise the contact but they are not under any obligation.
How liquid commodities are safe to invest is discussed below:
As mentioned above these liquid commodities are traded on large scale , it ensures that they have lower impact of cost and also have low trading cost as they are traded in high volumes. Traders are not required to compromise their price range here as they can easily find their trading counterparts. Here price fluctuations are less and other associated costs are also low which makes this market an attractive choice for traders to trade and earn in safest manner.
Traders across the world prefer to trade in liquid commodities over illiquid commodities because of these attractive features.To assure your good returns you can also take help from Financial Advisory Services providers for MCX trading tips. These recommendations of market analysts facilitates traders in satisfying their goals by earning required returns.