Basics Of Commodity Market

The commodity market is the market which is organized that is operated under certain establishes=d rules. It is the market wherein the buying and selling of commodities takes place.  The commodity exchange is an autonomous body that is self- administered, self-disciplined and self- regulated body. And it facilitates free competition between the sellers and buyers in the market. The commodities that get traded in the exchange include following things:

  • Mineral products like gold, mica, copper, lead, etc
  • Natural production from the soil like wheat, cotton, jute, tea, etc
  • Few of the manufactured products like clothing, artificial jams, gunny bags, etc

All kinds of commodities do not fit the criteria to be dealt in commodity exchanges.

Certain characteristics should be possessed by the products in order to be fit to be dealt with in commodity exchange. The criteria’s are set as there are numerous kinds of products exist and everything cannot be traded here.  Just like in the digital currency market, only the digital currencies could be traded and normal currencies are not allowed to be traded in that market. Trading digital currencies have to be done through automated trading robots like crypto code. Click here to learn all about it now.

Listed below are the characteristics that a product should possess to be dealt in the commodity exchange.

  • Homogeneity- The products should be homogeneous that means all the units of the product should be identical perfectly so that the dealers would mean the same product whenever they mention them in their dealings.
  • Gradability- The product should be able to be graded. If the product cannot be categorized into different grades that are well-known, then the trading with them would turn out to be tough every time whenever the quality needs to be ascertained.
  • Durability- In order to last the period of the future contract, the product has to be durable, usually more than a year. It the product perishes quickly, the contracts for the buying and selling would turn out to be invalid.
  • Fluctuation in price- The price of the product should be fluctuating frequently. The speculators will not be having any intention to be a part of the exchange if the prices do not fluctuate.
  • Open supply- The product supply should be free and open and it should not get monopolized by a few or a single person. Also, the price or product supply should not get controlled by the government.