Commodities - Basic Details of Commodity Trading in MARKETS - Lots of people are interested in Commodity Trading looking at the returns it provides in short time.
This thread is ...
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06-23-2011 11:14 PM
Basic Details of Commodity Trading
Lots of people are interested in Commodity Trading looking at the returns it provides in short time.
This thread is for Beginners who dont have any idead about commogity trading and also dont know how to trade in futures Trading.
Step1: You need to open an account with a broker who is Registered with MCX OR NCDEX.
Step2: After doing that, you need to select one or more than one commodities that you are interested in trading (like gold, silver, crude, guar, chana etc)
Step3: Now, For a given commodity, you have 3 to 6 contracts open that are identified by month and expires on a fixed date on that month. eg. gold sept, oct and so on
Step4: All you need to do is place an order either to buy or sell(you can do both without owing physical quantity).
Every commodity has a minimum trading size.
for eg, gold has 100 gms(mcx) to 1 kg(ncdx), silver 30 kg, guar,chana 10 tons(1000 kg). Therefore you can buy/sell minimum one or multiple of tick size.
Step 5: Now the payment Funda.
Futures trading is purely margin based trading similar in stock market. Every commodity has a specified margin value by the exchange that is to be paid by you for trading.
The margin varies from 5% to 20%. Exchanges do change the margin periodically when market goes too much speculative.
Step6 - Example:
lets say, I want to buy ncdx Chana sept contract currently trading @ 1920 Rs per quintal. I placed buy 1 lot(minimum) that is 10 tons. so the total amount calculated is 1 lack 90 thousands for 1 lot. So you hav to pay your broker only 6% of it. That is roughly 12000 Rs per lot.
If you dont sell that day itself and hold it, than your profit and loss will b calculated on "CLOSING MARKET PRICE".
so if the contract closes say 1910. that is -10, you have made a net loss of 1000 Rs. Simply saying every 1 rs gain or loss counts to 100 Rs profit/loss. (buying and selling one lot will cost you roughly 170 Rs brokerage)
Step 7: Profit and losses are automatically debit/credited in your account on daily basis. If your margin amount has fallen short. Your broker will ring you up for a cheque.
step 8: Dont forget to square off your positions before the contract expires. Otherwise you may need to give/take physical delevery of the good or face a penalty by the exchange.
I think i have explained a lot of things. If any reader still have any query, you can ask on this thread.
Views welcome.
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04-26-2012 05:45 PM
I like this forum very much for discussion.
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05-17-2012 04:14 PM
This is nice post which I was awaiting for such an article and I have gained some useful information from this site. Thanks for sharing this information.
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05-18-2012 01:38 PM
Indeed this will be very helpful to the people who want to start in the commodity trading, as a lot has been described about it over here specially step to step, through which a person may take the reference to continue further.
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05-23-2012 05:24 PM
Really very interesting forum for discussion.
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07-29-2012 05:02 PM
1) Do I need to do square off same day itself or can I hold the contract till expiry?
2) I possible to hold, is there any additional margin charges?
3) Is there any good reading material for commodity trading?
4) Any good trading strategy?
Please advise.
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11-01-2012 04:27 PM
Originally Posted by
amsin21 1) Do I need to do square off same day itself or can I hold the contract till expiry?
2) I possible to hold, is there any additional margin charges?
3) Is there any good reading material for commodity trading?
4) Any good trading strategy?
Please advise.
1) Do I need to do square off same day itself or can I hold the contract till expiry?
Ans: You can hold till expiry
2) I possible to hold, is there any additional margin charges?
Ans: No additional charges to hold. You just pay for the brokerage charges
3) Is there any good reading material for commodity trading?
Ans: Not sure really. If you can understand Nifty P/E analysis. It will help you understand when Gold rally will come.
4) Any good trading strategy?
Ans: Read my Book on "Art of Stock Investing" .... It has analysis on Nifty P/E. You can make out when Gold will rally most !
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11-25-2012 06:02 AM
Commodity Trading
I have doubt about the following..
1- Where I can I fount the Size of different commodities showing the minimum weight to buy in one lot? For example in gold there are different- like gold, gold petal etc,.
2- Other than ODIN ant other software is using to buy and sell?
3- If we bought one commodity and kept during contact time or take delivery in a warehouse, suppose if the quality of the product lost during the time and lost its value. who is responsible? ( In the case of agri- commodity it can happen)
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11-25-2012 02:34 PM
Originally Posted by
deerame I have doubt about the following..
1- Where I can I fount the Size of different commodities showing the minimum weight to buy in one lot? For example in gold there are different- like gold, gold petal etc,
You can find in mcxindia.com ... But i do agree that it is a little confusing. Gold is 1KG ... GoldM is 100 grams. Gold Petal is 1g.
2- Other than ODIN ant other software is using to buy and sell?
I use web interface.
3- If we bought one commodity and kept during contact time or take delivery in a warehouse, suppose if the quality of the product lost during the time and lost its value. who is responsible? ( In the case of agri- commodity it can happen)
I am not sure about this. Most people just trade and don't intend to take delivery.
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12-04-2012 10:43 AM
Your Basic Details regarding the Commodity trading is very good for the new investors who are planning to invest in the Commodity Market.With this information he/she can easily start the trading in the commodity segment.
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