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Basic of Commodity Trading Introduction to commodity Trading

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Commodity! GOLD, SILVER, IRON, ZINC WHEAT, MAIZE, RICE, POTATO CHILLI, TURMERIC, CORIANDER CRUDE OIL, NATURAL GAS . . . . .

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Trading Commodity! Find a seller Buy cheap Find a buyer Sell with some profits/loss

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Trading Commodity!

Barter System Monetary System

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Trading Commodity!

Spot Market Forward Market

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Spot Market!

Trading in Local Mandies Buying physical

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Forward Market!

Trading in Local Mandies on forward contract.

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Buy 10,000 Kg 5 rupee per Kg

Spot Market Price

Want delivery 1 month later Pay 10 % Advance

Rs. 5,000

You do contract with a farmer

You

Forward Market trading!

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After 1 Month

Forward Contract

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Pay remaining Rs. 45,000 Receives 10,000 Kgs Potato

Risk Involved : Default Risk

Default Risk: Because contract is between 2 parties there is no 3rd party guarantor.

In the previous example can deny to sell if Price rise too high.

The can deny to Buy if Price goes too low.

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Trading Commodities!

Online

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Trading on commodity

exchanges!