How to Start Trading in Commodities

What Do I Need To Start Trading In Commodity Futures?

Open an Account:

First of all, open a commodity account with a well-established broker like Enrich Money. You must first check their website and trading app if Commodities trading is included. Also check if they have a separate section for Commodity tips today. It is very important to get timely tips in commodities trading. Enrich Money provides the best commodity trading app , commodity report, commodity trading tips and expert guidance.

Choose the commodity market:

Next, choose which commodity you want to trade in. Here you must consider the various choices and your risk appetite. Commodities trading is slightly riskier than share trading usually. But even within Commodity trading, you should be clear about which particular commodity you are willing to invest in. For e.g., Crude Oil is widely popular but the risk involved is also high. Every commodity differs in risks involved, trends and investment involved.

Understand the current trend:

Study the current trend for the commodity of your interest. Never make a random guess and unnecessarily risk your money. If you do not have the time to do it yourself or are new to commodities trading and do not have the experience, do take the advice from an experienced broker like Enrich Money. Once you understand the current trend, you can decide what to do next.

Decide when to buy and when to sell:

Based on the trend analysis, if you feel the price will rise in future, then you can go ahead and buy now. This step is called “go long”. If you feel the price will go down sometime soon for a futures contract, then you can decide to sell. This step is called “go short”.

Decide the volume of trade:

After deciding to buy or sell, you must then carefully analyse and come up with the volume of trade you want to buy or sell.

Take Risk Management measures:

Monitor your commodity price chart closely, and ensure you are covered with a “Stop Loss order” where you decide to cut your losses or cap your profit. This is a very important step since prices may suddenly rise or drop based on world events or natural calamities over which we have no control. Overall, trading in commodities is more volatile compared to share markets. Always, learn about commodities trading first and then invest.

Start Trading with a Demo Account

Before trading with real money, practice trading strategies using a demo account offered by most brokers like Enrich Money. This will help you familiarize yourself with the trading platform and test your trading strategies in a risk-free environment.

Execute Your Trading Plan

Once you're comfortable with your trading strategies, start executing trades based on your trading plan. Stick to your plan and avoid making impulsive decisions based on emotions or market noise.

Review and Adjust Your Trading Plan

Regularly review your trading plan and performance to identify areas for improvement. Adjust your plan as necessary based on your trading experience and market conditions.

Conclusion

Trading in commodities can be a rewarding venture if approached with the right knowledge, strategies, and risk management techniques. By educating yourself about the market, setting clear goals, and following a disciplined trading plan, you can increase your chances of success in commodity trading.

Frequently Asked Questions

What Are The Brokerage And Transaction Charges?

The brokerage charges range from 0.10 to 0.25 per cent of the contract value. Transaction charges range between Rs 260 and Rs 1 per Cr/per contract.The brokerage charges will vary for different commodities.It will also differ based on trading transactions and delivery transactions.In the contract results in a delivery, the brokerage can be 0.25 - 1 per cent of the contract value.The brokerage cannot exceed the maximum limit specified by the exchanges.

Where Do I Look For Information On Commodities?

Spot prices, relevant news, and articles on most commodities are flashed daily in financial newspapers. Magazines on agricultural commodities and metals are available. Research and analysis support is provided by Enrich Money.   Enrich Money websites offer a variety of information that is easily accessible.

Who Is The Regulator?

The Forward Markets Commission regulates the exchanges. Unlike equity markets, brokers don't need to register themselves with the regulator. The FMC deals with exchange administration and will inspect the books of brokers only if they suspect any malpractice or if the exchanges themselves fail to take action.

Do I Have To Pay Sales Tax On All Trades? Is Registration Mandatory?

No. If the trade is squared off, no sales tax is applicable. The sales tax is applicable only in case of trade resulting in delivery. Usually, it is the seller's responsibility to collect and pay sales tax.The sales tax is applicable at the place of delivery. A sales tax registration number is required for those willing to opt for physical delivery. 

What Happens If There Is Any Default?

Both the exchanges, NCDEX and MCX, maintain settlement guarantee funds. The exchanges have a penalty clause in case of any default by any member. There is also a separate arbitration panel of exchanges.