“My favourite time frame for holding a stock is forever.”
Want to know why you need to start investing in commodity futures? In this article, you’ll learn about commodity futures and how to gain insight from a commodity pivot point. Knowing this insider tip will help you become a star trader. And we’ll give you 5 good reasons to start investing in commodity futures!
What you need to know about commodity futures
Currently, SEBI (Securities and Exchange Board of India) regulates the Indian commodity futures market. Commodity futures, called commodity futures contract as well, is an agreement to buy or sell a specified commodity at a later date. In the contract, the price and volume of commodities are fixed, so that they may be delivered as specified in the future transaction.
A futures contract is considered fulfilled upon delivery of the commodities to the buyer or from the seller. However, some contracts may be liquidated before the actual delivery date.
You need to open a commodity account with a commodity broker to start taking advantage of the commodity pivot point in the commodities market. Your account will need funds in it before you can proceed. When you earn money, it will be credited the next business day. However, losses incurred will be debited on the same day.
Unlike with stock marketing trading, you do not need a dematerialized (demat) account to trade in the commodities market. Generally, commodity accounts do not incur annual maintenance charges. Upon settlement of the futures contract, your money will be credited to your commodity account.
What is a commodity pivot point?
A commodity pivot point is a calculation and analytics strategy used in the commodities market. It is a technically sound method of determining whether the market is veering towards bearish or bullish at a given time. Established widely in the market, it has been proven to be the best indicator of a strong or weak market. This helps investors establish whether or not it is a good time to trade. Investors may wish to sell, or buy, according to the climate of the market and the commodity pivot point helps to that end.
The intraday high and low are averaged along with the closing price from the previous day to come to the commodity pivot point for that day. A Forbes article notes that trade above the commodity pivot point shows a bullish market. And below the commodity pivot point, therefore, indicates a bullish market. A smart investor makes calculated predictions based on the commodity pivot point to their advantage.
5 benefits of trading using the commodity pivot point
1. Assured demand
The running joke is that “trading in stock markets is subject to risk”. But, although this line is clichéd, it’s also very real. Extremes in the market makes it hard to find a buyer who wants what you’re selling. Stay on top of the commodity pivot point. By selling commodity futures contracts, you know you have an assured buyer.
2. Diversified portfolio
Prices on commodities are subject to environmental and political change. The commodity market is a separate industry, and helps traders diversify their portfolios with ease.
3. Control costs
Commodity markets are highly volatile. Thus, affixing a fixed-rate price on your commodities ensures your costs stay constant. Whether the market is bearish or bullish, you’ll stay in the lead.
4. Steady product supply
Draw up an agreement based on the supply you have currently. Buying a commodity futures contract assures you of a steady supply of products that you can fulfill and honor.
5. Hedge against price fluctuations
Importing and exporting products can impact your procurement and costs. With commodity futures, you get to enjoy the luxury of a stable price as agreed in the contract. This protects your product price and money from inflation and other volatile market activities.
Start trading in the futures market today! Open up a commodity account, and reap the benefits of utilizing the commodity pivot point to rake in earnings. All market activity is subject to risk, please trade wisely and with the help of certified brokers who adhere to the SEBI regulations.
To find out more, contact us at Enrich Broking today!