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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