Commodities, which have an inverse connection with equities and bonds, are included in practically every risk-allocated portfolio. This is because while the prices of these assets fall, the prices of commodities rise and vice versa. Furthermore, commodity trading permits investors to generate large gains if the process is done carefully and thoroughly.
But what is the bare minimum to get started in commodity trading?
Trading focuses on short-term investments in order to maximize profits. However, to assuage most traders’ curiosity, let us inform you that there is no minimum capital requirement for commodity trading. You can begin trading with any amount based on your risk tolerance because the costs actually vary depending on the commodities you want to trade and no, specific rules apply to the minimum amount except for certain commodities like crude oil which on estimate requires you to begin with at least 100 barrels, you must invest in order to trade. However, you do not need to be concerned. If your capital is limited, you can always look for commodities that do not necessitate a minimum purchase quantity and begin trading.
Trading Costs
As an active trader, commissions are likely to be the most pricey outlay. Other costs associated with online commodity trading activity may include software, Internet, and training costs.
Brokerage Prerequisites
Although there is no hard and fast guideline for how much money you must have in your account to continue trading, many brokerages will set it for you.
To get a good start, look for account minimums at the brokerages you’re considering. This figure actually accrues to the interests of the brokers, because they want you to keep continue trading for sake of earning their commissions.
What is the most appropriate asset allocation for commodity trading?
Commodity trading can be an excellent way to hedge against inflation as well as losses from other investment avenues like stocks and debt instruments.
On average, you can allocate 5% to 15% of your total capital investment to commodity trading as a wise investor. However, pulses, crude oil, gold, etc are thought to be smart commodities trading choices that will give you a profit in the long run.
Other Considerations
If you want to invest in commodities in India and want to experience truly zero-commission trading, connect with Shoonya.
Shoonya, as the name implies, is the true embodiment of a zero-brokerage trading policy, assisting thousands of traders in making intelligent investment decisions and helping them in earning good wealth without having to pay any brokerage.