Trading of any kind needs you to do proper research and understand the market thoroughly. It is the same with Commodity trading. As technology progressed, the face of trading in India changed and online trading came to existence. You can do commodity trading online too. Here we simplify how you can do online commodity trading in India.
Before you start trading you need to understand the basics of Commodity Trading.
What is Commodity Trading?
Commodities can be classified in the following types:
- Metals such as Silver, Gold, Copper, etc
- Energy sources such as crude oil, natural gas, etc
- Agricultural commodities such as Corn, Beans, Cotton, Rice, Wheat, etc
- Livestock and meat such as Eggs, Cattle, etc
Commodity trading is where you trade in commodities. You can trade in commodities through spots and futures in the commodity market.
Where can you do Commodity trading online in India?
You can do commodity trading in India on the following exchanges:
- Multi Commodity Exchange
- National Commodity and Derivatives Exchange
- Universal Commodity Exchange
- National Multi Commodity Exchange
- Indian Commodity Exchange
- ACE Derivatives & Commodity Exchange Limited
What are Spot and Future Prices?
In commodity trading, the spot price is the price of the commodity which is on sale on the spot. It is the price which is decided on the spot.
A future price on the hand is the price of the commodity which is quoted for a financial transaction on a future date. This is the settlement price of the futures contract.
Factors to Keep in Mind before you Start Commodity Trading Online
There are certain factors which you should keep in mind before you start commodity trading. They are as follows:
- Choosing a trustworthy commodity broker. Many commodity traders offer online trading services in India. You need to choose a trader who can help you with online trading from start to end.
- You need to choose whether you want to spot trading or trade through future contracts.
- You need to keep in mind the delivery factor here.
How to Start Commodity Trading Online?
1. Open an online trading account and demat account
Once you have chosen a trustworthy broker, you need to open a demat and trading account. You can open the account with the broker itself.
2. Select an initial Investment amount
Once you have opened the online commodity trading account, you have to make an initial investment to start trading. The initial margin is generally equal to the 5-10% of the contract value. As a trader, you are also supposed to have a maintenance margin which will help you cover the losses if any.
3. Build on a trading strategy
You need to have a plan to start commodity trading. You can make a plan based on the understanding of the market, your trading style, risk appetite, capital availability, etc. You can practice trading on simulations. You can build a strategy which fulfills your objective of trading in the first place.
In order to start commodity trading online, you need to have a broker, a trading account, a demat account and initial investment in place.