How to Open a Commodity Trading Account

Before we get into how to open a commodity trading account, Let’s have a quick discussion about the concept of “Commodity Trading”

What Is Commodity Trading?

• Commodity trading is as old as our civilization. It has come a long way from doing commodity barter. Even though commodity trading lost its charm in India a while back, It has again come back & is on the rise now.  

• Just like the equity trading exchanges, NSE & BSE, the Commodity market has got its own exchanges in India. They are the MCX (Multi Commodity Exchange of India Ltd) and NCDEX (National Commodity & Derivatives Exchange Limited). People trade agricultural products, billions like gold & silver & crude oil in the commodity market.

• In India, If you wish to do trading in the commodity market, you will have to open a commodity trading account with the broker who provides the service. 

• At Enrich Money, we specialize in commodity trading. Not just account creation, our representatives help you to understand more about it & help you start your trading journey in the commodity markets.

Benefits of Commodity Futures

Just like the equity markets, commodity markets have also got derivative trading options. The commodity futures market is on the rise in recent years. In the commodity market, as the volatility is lower, the profit-making chances are better at low risk. There are a lot of trading opportunities in the commodity market.

Less Manipulative Markets

The pricing mechanism is very transparent in the commodity segment. There is very little interference in the commodity markets from both the buyers & sellers. Hence more transparency & less market manipulation.

Good Liquidity in the Commodity Market

The trade volumes in the commodity markets are enormous. With that high volume, the commodity market has great liquidity. Hence even high volume orders are executed at ease without any adverse effects on the pricing.

Commodity Markets are used for Portfolio Diversification

This segment is a whole new asset class, people use commodity markets to diversify their investment portfolios

                                  

How to Open a Commodity Trading Account

To trade in the commodity market, you must open a commodity trading account with a reputed broker. This is possible both offline and online. The documents needed to open a commodity trading account are listed below.

• A filled application form

• KYC documents for account verification

• Proof of Identity (Aadhar card, Voter’s ID, PAN card, driving license, passport)

• Proof of Address (Aadhar card, Voter’s ID, driving license, passport, electricity bill, telephone bill, home rental agreement, home loan agreement, ownership agreement)

An agreement will have to be prepared between the trader and the stock broker. Here are a few tips regarding it:

• The contract is written on non-judicial stamp paper.

• It should outline the roles and responsibilities, charges, and fees of the broker. Make yourself clear about the available services and the costs it incurs.

• The agreement must be stamped by legal authority and should have a revenue stamp affixed to designate its validity

In order to complete the process, a trader should also submit:

• Business account statement

• A copy of income tax returns verification or Form 16

• Net worth certificate

• Certificate of demat holdings

• Bank statement for the last six months

• Details of the demat account to link it with the trading account. This enables the credit or debit of derivatives from this account

How to do Commodity Trading Online

Online commodity trading has recently become popular among investors due to its convenience and ease of use. It enables dependable and efficient trade execution via high-end integrated trading applications. The moment you log into your commodity trading account, you have everything at your fingertips. Traders get access to updates, live quotes, research, and even online assistance.

After you've found a commodity trading broker and been approved to trade, the next step is to fund the account. Despite the fact that many traders have minimum funding requirements, it is up to the investor to determine the funding amount. When selecting a fund, one's level of comfort and risk tolerance should be taken into account. However, before engaging in actual trading, traders should present a well-researched strategy. Some brokers provide simulations to help traders become acquainted with placing orders. This prevents critical errors from occurring during the trading process.

Points to Remember in Commodity Trading

Begin Small

It is always advisable, to begin with, small amounts. This avoids huge disappointments during losses during the initial stages and provides more freedom to learn from mistakes.

Understand the basics

Know the basics such as the type of commodities that are on sale. It is better to use simulation to get familiarized with the trading practices and the commonly used strategies.

Diversify

Diversifying is one of the tips that is given to a commodity trader. Investing money in different commodities helps you understand the risky ones and the non-risky ones. However, ensure not to invest in too many commodities which may negate the potential returns.

Use Online Trading Tools

Make use of online trading tools such as price alerts, charting tools, watchlists, portfolio management tools, and so on. These tools keep you informed and help you to make wise decisions rather than acting on instincts.

Ask for Help

Several analysts and advisors are available whose job is to assist those who are lost in a trade. In emergency situations, seeking the help of an expert is the right thing to move forward.

Invest slowly

Investors may get carried away by fast-approaching money. However, it is always wise to start slow and progress eventually as and when you understand the way the market functions.

Why Invest in Commodity Trading with Enrich Money

Trading with Enrich provides the investor with an online trading platform that satisfies all the requirements. Being one of the best commodity brokers in India, Enrich provides a rich trading experience with excellent internet connectivity and an online trading platform where traders can develop strategies and implement them faster. With enrich, the traders can access user-friendly trading software which includes market watch, extensive charts, and live market updates. The moment you become part of Enrich Money, you have access to live market updates,    brokerage calculator, expert analysis and reports, live market scenarios through SMS, and get to learn technical aspects of trading. The SMS alert system is designed specifically to enrich customers which include trade status, transaction summary, and morning ledger balance reports.

Regarding fees and other charges, Enrich Money ORCA is the best among India’s commodity brokers. Enrich dealing desk works efficiently through phone calls and is free of cost. For example, a trader can speak to the team on phone and place an order at zero cost.