Before we get started with trading in commodity markets lets understand some terms viz. MCX and Commodities.
So What is MCX and what commodities are traded?
While most of us are aware of the Nifty and Sensex which are the two major indices for Equity trading in India, MCX (Multi Commodity Exchange on India) is the Index where commodities are traded. That was simple! Now there are 2 category of commodities being traded on MCX
- Agri Commodities: As the name suggests these include agriculturally produced commodities like Wheat, Maize, Sugar, Seeds, Cotton etc.
- Metal and Energy : This category includes the base metals like copper , zinc ,aluminium etc and the two main energy related commodities i.e. Crude Oil and Natural gas.
The two categories mainly differ in lot sizes and the timings till which these are traded. In general , the trading hours for Agri commodities is from 10 AM to 5 PM on weekdays and 10 Am to 11:30 PM on Saturday.For Metals and Energy, the timings are from 10 AM to 11:30/11:55 PM depending on the daylight savings schedule only on weekdays.
Now, having some idea of what and when it is available to trade the question would be how and where to get started? Let’s understand how and where to start and also why the particular choice of commodity to get started.
To get started you would first need a commodity trading account via a registered broker and the most important – Initial investment for margin money. And as a first time trader, you would want to know that what is the minimum amount using which one can start trading. Here we come to making our choice of the commodity which can be traded using the minimum investment. The Silver Micro contract on MCX would be an ideal choice to get started as this is one of the smallest lots (1 KG of silver) in terms of the cost on investment (about 43000 Rs). So, even if you get a leverage of about 10 times, you can easily trade 1 lot of Silver micro with an investment of Rs 5000-6000. Not only does it cost less, it has enough price movement on most days wherein you can trade this for a price difference of about Rs 200-300 atleast and earn about Rs 180-280 post the brokerage and other charges. That is a good to get started and learn the basics. Also, lower size of trade initially would mean lower risk during your learning curve.
With the above knowledge, I hope you can get started with your first commodity trade in MCX. Do share your comments or questions below and I would be happy to answer.