The three top most traded markets in the world according to the trade volumes are -:Currency trading
Commodities trading
Stock market trading.
Since only commodities and stock market are open to common traders in India,currency trading is of less importance in our analysis.
How is stock market realated to commodities market?
Since nearly every commodity is open to trade on the index.The spot price is decided on the basis of the trade taking place in the index.(spot price is the actual price we pay in order to get the physical delivery of the commodity).As evident from every day news on channels commodity market is on a life time high at the moment .this is resulting in high inflation in the society.(Inflaion is the acual increase in the price value of different commodities).With hike in inflation the commodities basic as well as luxurious are getting expensive and in turn people are left with lesss money to be invested in stocks.So in turn the stock market index fall on a global perspective.
Q.Is the sudden upward trend detrimental to our country's growth?
commodity exchange is basically for hedging purpose(Hedging means protecting onself from the unexpected changes in prices in future).Since the exchange can help against the unexpected changes in prices , the exchange serves a good purpose for the traders of the commodity but since exchange is open for all including speculators and professional traders,the prices acn always pose a wrong picture of the spot price in market.The sudden bubble formation in the prices of certain commodities resulting from speculations can always pose a great problem to the actual bearer of the situation.For example -:The gold traders (jewellers)e facing a huge problem arising out of a sudden hike in gold prices.As they are not equiped with knowledge of exchange trading they are ignorant of the ways of hedging against the sudden fallouts in gold prices.
Since commodity market is not being properly worked on by the actual traders in the market ,the futures market for commdity is not able to serve the purpose it is required.
Rather then simply opening up the markets for futures trading,Government should workout different policies of how to get the purpose of futures commodity market to the actual traders in our country.For example :In United states , every farmer hedges his position for his commodity in the commodity index in order to hedge himself againt the sudden changes in the prices of his commodity.This is reason why the American farmers own private airplanes and our Indian farmers are deprived of food.
Q.Is it possible to make money out of stock and commodity market for the investor ?
As i m a trader in commodity market ,it is not possible to make money out of stocks and commidity index on the basis of speculation.There are two types of trading techniques which are :
technical analysis trading and
fundamental analysis trading.
professional traders use tecnical analysis techniques with modern graphs ,different series ,stop loss techinues,etc.If a person follows these tools then it is possible to make money out of index but if these tools are not available then money will flow from speculator to profeesional in the long run.The speculator will always be empty handed.
But the story is still not complete .If the investor invests on the basis of strong fundamental analysis,then the position can turn in his favour in the long run but not in the short run.(fundamental analysis is done on the basis of which sector the company's in?what are the projects undertaken on past few years?,etc)
4 comments:
Great article Nimish. I am fully with you conceptually on the importance of fundamental analysis. I am not very sure whether it really holds good always in the India market where markets are not yet mature and possibility of manipulation does exist.
its a good article.i want you to clarify me on one point.u said in your article that indian farmers are
poor as government is not working on
realizing the purpose of commodity trading and there is opposite case for american commodity market.but there are speculators and professional traders also in america then how are they working
on commodity exchanges?
I think the speculation aspect always yield negative returns in the long run.But i totally agree that in this immature market some speculation can yield you some hypothetical profits on many occasion.But if you speculate then markets are casino and there's an established notion that owner of casino always earn profits which are taken up from the people who play the game.
To Parin-:
I dont know the exact reason for the American farmers able to hedge and Indian farmers are not able to .But according to me ,the awareness among the American farmers and support from Government are the major factors enabling them to hedge their positions.
Post a Comment