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Questions (FAQs) on
What is Commodity market?
Commodity market means an organized platform or exchange where you can buy or sell commodities. You can either trade in the commodities in spot, meaning physical commodities or else just like stock derivatives, you may trade in commodities using commodity derivatives too. Dealing in commodities thru either of these is a part of the commodity market.
MCX & NCDEX are the 2 largest commodities trading exchanges in India which offer you the facility to trade among a wide variety of commodities.
Which Commodities can be traded on the exchange platform?
Across all commodity exchanges in India, more than 100 commodities are tradeable. MCX is known for metals and energy commodities whereas NCDEX is more popular for agri based commodities, though both of them offer many other commodities to trade as well. The most frequently online traded commodities at MCX are – Gold, Silver, Crude Oil, Mentha, Copper, Zinc, Natural Gas whereas at NCDEX the highest traded commodities derivatives are of – Soyabean, Soy Oil, Rapeseed, Guarseed, Pulses.
How can I trade in commodities?
To trade in commodities, all you need is to open a Commodities Trading Account. Remember, this is not your share trading account and can not be linked to share trading as well. Because the regulations require you to keep stock and commodity trading separate as of now. For trading in commodities, you don’t need any demat account at all.
You can find commodities brokers near you, check for their brokerage rates on commodities trading and then can open your account for the same. Normally the brokers either don’t levy account opening charges or if they ask you for it, they offer you some brokerage credit or cash back scheme against the same.
Some Important Points to remember while trading in Commodities
Commodities trading on exchanges happen in derivatives contracts.
All commodities have their commodity futures contracts available but options trading are currently available only in some selected commodities in India.
Commodities contracts are also standardized derivatives contracts. The contracts, their lot sizes & contract expiry dates are prefixed.
Just like equity derivatives, commodity derivative contracts too carry a high degree of risk.
Commodity exchange timings are in 2-time slots. First Slot is 10:00 am to 5:00 pm which is applicable to Agri Commodities whereas the second slot is 10:00 am to 11:30 pm which is for all other contracts.
During the daylight saving period in the US, the second slot end timing is revised to 11:55 pm.
For buying or selling a commodities futures contract, you need to pay margin at a certain %age.
Commodities markets also have daily MTM (Mark to Market) and you need to keep sufficient margin on daily basis.