Guide To Start A Commodity Trading Business in Dubai

Dubai is an international center for commerce and trade; Dubai serves as a stepping stone for foreign companies interested in accessing the Middle East, Asian, African, and European markets. Geographically, it is well located, it links the East with the West, and the North to the South, which creates a natural hub for producers, manufacturers, and consumers through a well-established aviation and logistics infrastructure. Trade: Historically, Dubai has always been a major global market in the physical trade of gold and several other varieties of commodities and commodities trading, and with its modern, progressive, pro- businesses legal system, state-of-the-art infrastructures, and technologies, it has turned into one of the most significant commodities trading centers around the world today.

Overview Of Commodity Trading Business in Dubai

In the Future of Trade, 2020 report just released by Dubai Multi Commodities Centre (DMCC), the UAE on average falls in the top three world commodity trade centers. The Commodity Trade Index (CTI) relates ten factors for ten important trading locations worldwide concerning the three elements of the GTI framework including commodity endowment, institutions, and location/trading partners. The complete picture of the evaluated aspects of the UAE’s international trade, based on the 2020 Index, is shown as follows UAE was in second place right after the USA for the visualization of commodity endowment factors, of 74%, the UAE substantially distanced from other world trading centers, which is explained by the position in terms of its export of oil and natural resource rents in the GDP. Thus the country ranked fifth in institutional factors (70%) and sixth in the locational and trading partners factors.

Major export goods business in Dubai are crude oil, refined oil, gold, diamonds, petroleum gas, ornaments, electrical equipment, automobiles, aluminum in primary form, and rolled tobacco. Gold is this country’s most common non-oil export product and the United Arab Emirates is number six in the world in this sphere. It ranks 5th among the world’s largest diamond exporters, the second among the world’s largest exporters of aluminum and copper wire; and holds the lion’s share among the world’s exporters of rolled tobacco. Major imported commodities are gold, refined petroleum, diamonds, crude petroleum, refined copper, broadcasting equipment, jewelry, automobiles, gas turbines, and computers.

What Is Commodities Trading?

Definition of Commodities Trading

Hence, commodities trading deals with buying, selling, or the process of exchanging raw materials or primary products. These are conducted within specific markets where you will also note the participation of both the considerable number of individuals and major companies engaged in exchanging these vital goods.

Fundamentally, commodities trade is based on the??? physical products and or those that are utilizable as final consumer items or intermediate in production processes.

Types of Commodities Traded

Commodities are usually split into two main categories: and two opposites of organizational power, namely, hard and soft. This covers the soft and hard commodities which are oil, gold, and rubber among others, these commodities are classified as natural resources that are mined or extracted.

These resources are usually involved in several productions in industries and are normally mined from the surface of the earth. On the other hand, soft commodities are crops or meats like wheat, coffee, sugar, soy, and pork among others. They are cultivations and are usually smaller and tend to have a relatively shorter lifespan compared to the hard-coated ones.

Historical Information on Commodities Trading Business in Dubai

Historically the United Arab Emirates (UAE) has been involved in commodity trading. This ranges from being one of the main constituents of the old Silk Road to the technical commercial inventions in the modern trade. The period after the implementation of the Value Added Tax (VAT) in the UAE has put a challenge in interpreting this tax together with its application concerning the commodity trade segment.

The Commodity Exchange Act in the UAE aims at preventing the trading in commodities; livestock and livestock products included. As of December 21, 2001, the rule also stipulates minimum net financial requirements of FCMs.

Commodities Trading for Beginners

Prerequisites for Trading Commodities Business in Dubai

As a result, to attempt commodities trading Business in Dubai, one has to know the market and its products in and out. Education is always important in creating an understanding of the various factors that influence markets. Licenses and certifications can also increase not only the trader’s reputation but also his opportunity to be promoted and get a better status in the trading community. Such qualifications and analytical and problem-solving skills enable the traders to manage the level of volatile nature of the market.

It does prove that practical work is the best work as it provides insight into the current trends and assists in the development of a strong database of contacts in the line of business. Networking is very important as through it can get better opportunities and information. Other values that should be evident and have an impact on this particular industry include discipline and patience since running a successful business takes time.

Choosing a Commodities Broker

It is also important that the broker an individual is choosing to invest with will have to have SCA licenses. So applying to go into brokerage requires a filled-up form and other documents that you have to upload through the SCA website. The SCA also requires certain conditions in establishing brokers’ staff, including qualifications and experience and essential measures on outsourcing and financial segregation.

There are more and more brokers that allow adjusting an account to a particular trader, and their rates depend on such aspects as an account size, previous trading with a client, etc, for example, Cannon Trading Company provides services for different types of traders.

Setting Up a Trading Account For Commodity Trading Business In Dubai

The trading account is mandatory to trade on trading platforms and exchanges like DGCX and the DME. Interestingly, the income earned from the operation such as commodity futures are exempted from taxes in the UAE, which is another advantage for the traders.

Such accounts allow for operations in different agents like ETF, commodity-interest related-sEK or mutual funds, and so on. Currently, it is possible to trade in various commodities through eToro, AvaTrade, and Saxo Bank among other trading platforms from global markets.

How to Trade Commodities

Thus, engaging in the commodity trading business in Dubai can be not only interesting but also a rather profitable business. However, the different methods of participation are worth knowing before directly engaging in this trading business.

Commodities Futures

Commodity futures are preferred when it comes to the method of investment. Unlike options which simply offer the right to buy or sell at a fixed price in the future futures involve daydreaming about how much you think the commodity in question will be in the future. This is particular knowledge and experience, as here the return on your capital depends only on the price movements forecast.

Futures trading is mostly obtained by getting in touch with larger brokers and platforms that specialize in trading. The price of futures often varies by contract and fees for futures are also calculated on per contract. While choosing a platform one should pay attention to the securities’ level, and customer support of the broker.

Physical Commodity Purchases

Commodities can also be purchased as a form of investing through the physical aspect. It could be direct, such as physical cash, gold or silver bullion, or services that could easily or readily be sold in the market, such as accounting services. However, this comes with its challenges, for instance, there is the issue of storing the data, and retaining its security.

Commodities Stocks

The next possible investment area is the so-called commodities stocks. This is done through the acquiring of stocks in companies that create goods. Although this strategy does not give you direct exposure to the movement of commodity prices you can use it to play the commodity sector and the possibility of dividend income.

Commodities ETFs, Mutual Funds and ETNs

The other route of investing in commodities is through commodity exchange-traded funds (ETFs), mutual funds, and exchange-traded notes (ETNs). Some examples of commodity-related ETFs and mutual funds are as follows- You can get exposure to different forms of commodities through ETFs and mutual funds. Again, the best ETF for trading in commodities is going to depend on the type of commodity that you are interested in and more to the point how you wish to take a position in that particular commodity.

Commodity ETNs are coupon securities that have a feature of debt and give assured returns on an indicated commodity index. Like commodity ETFs, they are traded in the market but they bear credit risk as bonds do. Originally, they were designed for an investment in less accessible instruments, particularly in commodities and currencies, to make it easier for the new retail investors. Nonetheless, they depend on the credit guarantee by the issuing bank, so, it is an important factor to be aware of the credit rating of the issuer.

Join and start your exciting trade Business in Dubai!

Thus, the opportunities for investors increase as Dubai builds up its position as one of the dominant players in the market of commodities. The global market of business in Dubai contains the commodity trading facilities needed to meet all the diverse ways people want to invest.

Being supported by strong regulation, a wide range of tools, and a favorable geographical location, Dubai offers experienced commodity trading professionals and keen beginners to enter the sphere of high activity and uncertainty. When someone gets the knowledge of proper tools and risk management strategies, trying this market can be fun and profitable. Here start your trading expedition in the colourful business mart of Dubai with BizDaddy.?