Below is the common procedure of initiating commodity market trading in India?
Commodity Markets – Where all primary or raw products are exchanged here. These raw commodities are bought and sold on regulated of commodities exchanges, in which they are traded in the standardized contracts.
Commodities Trading – Another form of the investing in the commodity products. It is very similar to the stock market trading, but instead of the trading shares of companies, Investor trade commodity products. As like stocks, commodities are traded on commodity exchanges where traders can work together to either obtain the products or to create a profit from the changeable prices.
MCX – Multi Commodity Exchange of the India Ltd is a state of the art electronic commodity futures market exchange. MCX was developed in 2003 and based in the Mumbai. It is the world’s 6th largest commodity market trading exchange.
Getting initiated with commodity trading:
- Choose Brokers – Several already established stock brokers have sought connection with MCX. Check out the record of the commodity brokers.
- Minimum Investment Amount – The starting investment amount is the approximately Rs. 6, 000/-. It varies for the different types commodities. For example, if you wish for to trade on the Mini gold (100g), you require approximately Rs. 8, 000/- and for the Mini zinc, you require Rs. 5, 500/-. But starting your dealing with Rs. 10, 000/- will be ideally for good.
- Transferring Money to Trade – You can straightly deposit to the Brokers company account, Demand draft, Net-banking and cheques are all potential ways. Most of the brokers will permit all the above options, only some brokers have restricted bank cheques. The broker is also providing good Commodity Tips according to the market trend.
Basic things to open trading account –
- Bank account
- PAN Card
- Address Proof
Note: The brokers will charge you Rs. 250/- to 500/- for the opening trading account.
Basic Needs for Trading – Every of you need is online (internet) connection and the trading application. Don’t be bothered about the trading application, the brokers will help you for installing it to your personal computer and they will teach you to manage the platform, even brokers provide you daily MCX Tips. But commodity, NCDEX premium tips are forever best and also you can obtain more.
Trading Time – MCX always open at 10:00 AM and will close at 11:30 PM. Under these times you can buy & sell.
What is a Commodity Trading?
Selling & Buying of any products are called ‘PRODUCT TRADING’. In the Commodity Trading, retail customers or traders are doing the selling and purchase of products through the Multi Commodity Exchange (MCX) with the help of Internet or Online.
Major Commodity products are: Gold, Copper, Silver, Aluminum, Zinc, Nickel, Lead, Natural gas, Crude oil.
How Can I Trade at the Commodity Market?
There are 2 types of the trading are there:
- Online Trading: By Using the Internet you can buy/sell on your own – Buy and sell independently. (Benefit: By trading on your hand, no one is misguided and wrong information / Broker can suggest lower brokerage)
- Offline Trading: With the help of trader working in the Broker Company, you may be called & trade. (Benefit: You can trade anyplace by the phone- call and trade. The dealer may assist with correct entry / exit)
You can select the option, which one is best for you.
MCX (Multi Commodity Exchanges) & NCDEX (National commodities derivatives exchange) are the 2 major exchanges in India.
- MCX – Internationally/ globally, products like Gold, Crude Oil and Silver are traded by this exchange with more liquidity & volume.
- NCDEX – Including metals, like Silver, Gold and Agri products are traded by this exchange. Especially broker is provided premium NCDEX Tips for trading purpose.
Difference between Online & Physical Trading –
Margin is low here 10% enough
Full margins needed
Safe your position in exchange/computer
Need to safe in the locker/warehouse
The charges are very less (1/10 of physical trade)
Charges are high
Trading Example for Online Trading:
Mr. Rahul, thought of the increasing copper rates on upcoming months, so selected & purchased copper at 525 * 1000 kg = 5,25,000/- he paid starting margin of 6 percent Rs 25,000/- only, as per expectation rate went up by Rs 5/- in a month i.e. Rs 430/- He booked the profit 5*1000 kg = 5000/-.
So = Rs 25,000/- margin investment + profit Rs 5,000/- = Rs 30,000/- His current CAPITAL amount.
If rates are unfortunately gone down by Rs 5/- means he made a loss of the Rs 5,000/-
Here, 25,000 margin investment- loss 5,000 = 20,000/- His current CAPITAL amount.
High returns, but high risk of Rs 5,000/- is probably by investing 6 percent of the margin Rs 24,000/- in the online commodity trading.
How to Open Commodity Account:
It is not that difficult to open a trading account in the India, all you require is the below three essential documents and clear passport size photograph. You can choose any brokerage firm directly to open the commodity trading account or you can phone call the brokerage company for the application and they will provide you the application via courier. You require to fill the application form, pin the below document photocopy and return them back to the brokerage firm. Within a day your trading account will be opened among the necessary software’s.
The below documents or requirements are needed to open a commodity trading account:
- Bank Account/ Cancelled Cheque Leaf – Brokerage company need for the register your bank account details for a fund transfer procedure.
- PAN CARD: PAN card Xerox copy.
- Address Proof: voter id or ration card or driving license or passport (Any one in Xerox)
- Photograph: 1 or 2 passport size photographs.
Give all the above documents and information to yourself verify or attested along with trading account opening form, then after checking all documents, your commodity trading account will open approx same day or depends on your brokerage company.
10 Steps to Invest in Commodity Market:
In the previous four years, commodity futures trading has emerged as a big investment option in the India.
Now days, commodity market performance is equal to that of the currency market, stock market. The broker can provide best call and future tips similar to stock and Currency Tips. The analysts predict that the commodity market will overtake the big capital market in the trade volumes sooner than afterward.
But since the commodities future market is a comparatively new entrant in the India, not many traders know how to tap & benefit from the trading in several commodities.
Here are the top 10 steps that you extremely need to know to spend in the commodities market.
- Step 1: Locate a brokerage firm with a reputation for the service.
- Step 2: Fill a Demat account application form with a registered brokerage firm and a client with the national commodity exchanges. You can require address proof, PAN card and passport size photographs.
- Step 3: Be sickly clear of the rules & regulations, especially the transaction costs.
- Step 4: Select the correct brokerage plan and package that optimizes your costs, the brokerage fees ranging from the 0.03 to 0.08 percent on the contract value.
- Step 5: Be always clear of the segments service deliverables to your broker.
- Step 6: Insist on daily and weekly reports and special knowledge or training opportunities.
- Step 7: Set aside the funds for the commodity market investing, but remember not at the any cost of other conventional investment avenues.
- Step 8: Focus on some commodities, collect requisite knowledge and give up the initial cash amount for margin amount, account opening costs and annual maintenance costs.
- Step 9: Clear all doubts now set SL (stop loss) and book all profit levels.
- Step 10: Get ready for the investing and follow your success & losses every the time.