Why is Commodity trading better than Stock Market?

In India, commodity trading deals in the trade of metals, energy, and agricultural products only. It is generally carried out in the futures market. The futures market is one where a trader agrees to purchase a commodity after a certain period of time at a pre-determined price. As a matter of fact, commodities offer enormous potential to develop a discrete asset class for market-savvy investors, arbitrageurs, and speculators. The retail investors who claim to understand the equity markets may discover commodities as an immeasurable market. But commodities are easy to recognize as far as ground rules of demand and supply are concerned. Retail investors need to understand the rewards and risks incurred with the trading in commodities futures before taking a leap.

Benefits of Commodity trading:

1. Trading in future commodity has been the part of the economy for years. Investors are essential market participants who vaccinate liquidity and support hedgers to transfer the risk. The deficiency of investors will mean that there are fewer players in the market, making it tough and costly for participants to transfer the risk.
2. All commodities are traded worldwide and the global-demand supply condition is broadly known and available to any person who reaches out for it. Therefore, understanding commodities is not difficult as the trading involves basic economic factors and seasonal cycles affecting the price of a commodity.
3. Most exchanges put quality-check measures to make sure that the commodities are delivered to their warehouses meets the high quality standards. They also mark determinations to ensure that only quality stocks are delivered to buyers.
4. Commodities are no more volatile than the stocks if the leverage is been removed.
5. Today, a manufacturer of copper wire in Ludhiana can see the current international price of copper in the USA on his trading terminal. Likewise, a farmer in Punjab can determine the current price of wheat in Madhya Pradesh. By consenting wider contribution and participation, commodity exchange discourages cartelization by local traders and firms and facilitates them with fair price discovery.