Commodity Tips and Futures Trading in India


With the mange up of national wide Multi Commodity Exchanges (MCX), an innovative avenue has been fearful open for the Indian investors or traders. These exchanges have E-trading and good settlement systems, making, it’s easy and simple to trade in the commodity futures. The trading on these exchanges doesn’t require the traders to possess physical stocks. In realty less than one percent of the whole traded volume includes the transfer of the physical commodities.

Commodity futures trading contains of 3 simple steps.

  • Choosing a Broker
  • Depositing the Margin
  • Access to Information and a Trading Plan
  • Process Flow in Futures Trading

All of the above steps are general when investing in the Commodity Exchanges as like MCX, NCDEX and ACE. In the next section we will study how to select a commodity broker that will suggest you the best commodity trading experience.

  • Choosing a Broker.

The broker you select should be a real member of the exchanges you want to trade in. Rather than this, one must keep the following these factors in mind until choosing a broker:

  • Competitive edge gives by the broker.
  • Broker’s information of the commodity markets.
  • Credibility of the broker.
  • Experience of the broker.
  • Net-worth of the broker.
  • Quality of broker’s trading platforms.

The connection between the broker and the customer is the long-term. Thus, there should be a strong support, mutual faith between the customer and the broker. Further, the customer must communicate clearly the broker his requirement, needs and objectives for the trading in the commodities, whether they are for the reason of the hedging, investment, etc. Further, your motives for entering the commodity market give you with an important parameter and Free MCX Tips to judge, whether a broker is right  your needs.

In order to stay your all investment decisions, objectives and motto in check, it is very important to choose the correct certified Commodities Broker firm, it is very important to learn about the trading process of depositing margin for the commodity market trading and why it is very necessary to deposit all margins with the broker.

  • Depositing the Margin

To begin, start trading, the investor or trader needs to deposit margin money with his broker. The margin money requirements are of 2 types, the starting and the maintenance margin. These margin money requirements vary about commodities & exchanges but normally, the opening margin ranges from 5 to10% of the agreement value.

The maintenance margin money is usually less than the initial margin money. The trader’s position is marked to the market regularly and any type of profit or loss is managed to his margin money account. The traders have the option to withdraw any other money from his margin money account if his position creates again. Also, if the money account falls below the maintenance margin, then a margin call is created from the broker side and the investor wants to replenish his money account to the initial level.

  • Access to Data, Information and a Trading Strategy.

As commodities futures isn’t long term investment market, their performance, NCDEX Tips and updates needs to be monitored. The traders should have obtained to the prevailing rate on the commodity exchanges as well as market data, information and important Commodity Tips  that can help predict rate movements. The brokers provide analysis and research to their customers. Other information resources are specialized magazines on commodities, financial dailies and the online. Further, a trader requires a trading plan and strategy. Such a trading strategy can be developed in the consultation with the all brokers. In the any case of, the traders have to remember to outing his profits and short his losses by using SL (stop loss) orders.

  • Process Flow in Commodity Futures Trading.

After the whole process of the opening account is complete the investor may wish for to trade in the commodity market. IT is extremely important to know the whole process after the commodity trade is placed.

An investor places a commodity market trade order with the help of a broker (at the trading desk) via phone. The trader puts the order in the exchange trading structure. At the start of the trade, a rate is set and early margin money is transacted in the account. At the last end of the day, a settlement rate is measured by the clearing Exchange. Depending on if the commodity markets have stimulated in favor or against the trader’s position the money are either being pinched from or added to the customer’s account. The whole amount is the dissimilar in the traded rate and the settlement rate. On after day, the settlement rate is used as the base rate. As the spot market rates change each & every day, a new settlement rate is determined at the last session of every day. Once more, the account will be managed by the dissimilar in the new settlement rate and the previous night’s rate in the appropriate manner.

  • De materialization of commodity contracts.

Some of the basics for providing and taking delivery of the commodities in the commodity futures markets.

De materialization is the procedure of the recording physical holdings like as warehouse receipts in E-form. It facilitates the simple & easy transfer of the holdings through E-mode. The traders open a trading account with a fine depository participant (DP) of the NSDL, take the goods from the warehouse and create a request for the Demat credit. The warehouse permits goods for the storage & delivery. The goods are evaluated and the information is sent to the NSDL by the R&TA (Registrar and Transfer Agent). The R&TA is the connection between the warehouse and depository. NSDL, upon verification from the R&TA, credits the ICIN (a single number selected by NSDL for the identification purposes) balance in the Demat account of the customer.

  • Entities in De materialization.

Once the customer/investor wants to receive the goods on the futures exchanges/he will come crosswise various entities in the procedure. The Depository Participants (DP) are market intermediaries among the customer and National Securities Depository Ltd (NSDL). DP can be organizations involved in the commodity business of giving financial services like banks, custodians, brokers, financial institutions etc. NSDL controls most of the securities and commodities held & settled in the dematerialized form in the commodity market. R&T is a mean of the continuous E-communication between NSDL & issuer. Registrar & Transfer Agents mange the number of the commodities in the Demat form on a regular basis and regular reconciliation between NSDL & customer. The exchange accredited warehouse permits goods for the storage; assaying and information provide to NSDL via R&T agents.

If the customer/investor wishes for to receive the goods on the futures exchanges/he will have to live through a defined procedure of the De materialization. In the process of De materialization of Commodity, the customer has to submit all the commodities and send a request form to the commodity exchange accredited the warehouse. The warehouse is totally checking the quality & quantity by assaying. Once the confirmation is successfully complete, the warehouse provides the acceptance all information to NSDL (DP) from the registrar & the transfer agent (R&T). Once NSDL takes the confirmation from R&T worker, it credits ICIN balance in the Demat account of the customer.

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