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FAQ's
Facts about Commodity Trading
1991 saw a process of economic liberalisation in India. In later years, the government and the Forward Market Commission (the commodities market regulator) started to work for reforms in the commodity market. Came April 2003, almost all the commodities were allowed to be traded in the futures market. Multi-commodity exchanges at national level were created to start futures trading in commodities online, to make trading in commodity futures more clear and profitable. With so many commodities available for trading, trading in commodity futures market is being viewed as a significant business segment by many– businessmen, investors, institutions, brokers, banks etc.
Though a few years old, the organized Indian Commodity Market, is at its nascent stage and has a large potential to provide enormous opportunities to the investors and other market participants. The most prominent national level multi-commodity exchanges in India at present are the Multi Commodity Exchange (MCX) and the National Commodity & Derivatives Exchange (NCDEX). All the traditional and generation next commodity exchanges are regulated by the Forward Market Commission (FMC) under the Ministry of Consumer Affairs and Public Distribution.
Q.What is "Commodity"?
A. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade. The national commodity exchanges have been recognized by the Central Government for organizing trading in all permissible commodities which include precious (gold & silver) and nonferrous metals; cereals and pulses, oilseeds, oils and oilcakes, raw jute, sugar, gur, potatoes etc.
When did commodity trading start n where? When in India?
The first exchange was started in Chicago, America named Chicago Board of Trade (CBOT) in 1848. The Bombay Cotton Exchange founded in 1893 was the first organized commodity exchange in India. However, only few years back, the government came out with the concept of demutualised, electronic (on-line, screen-based), national level multi commodity exchanges as part of its agricultural and economic liberalization program. The most prominent national level multi-commodity exchanges in India at present are the Multi Commodity Exchange (MCX) and the National Commodity & Derivatives Exchange (NCDEX). All the traditional and generation next commodity exchanges are regulated by the Forward Market Commission (FM
Which commodities are traded on MCX?
( www.mcxindia.com/products_gold.html )
The following commodities are available in various categories:
Basically there are three types of members who participate in trading futures. They are Hedgers, Speculators and Arbitragers.
Hedgers :
Hedgers are those who protect themselves from the risk associated with the price of an asset by using derivatives. In general, hedgers use futures for protection against adverse future price movements in the underlying cash commodity. Hedgers are often businesses, or individuals, who at one point or another deal in the underlying cash commodity.
Speculators:
Speculators, the second group of futures players, provide the much needed liquidity and hence are the backbone of the market. These participants include independent floor traders and investors. Speculators have certain advantages over other investments in a way that he can make more money in the futures market faster because prices tend, on average, to change more quickly.
Arbitrators:
Arbitrators are the person who takes the advantage of a discrepancy between prices in two different markets. If he finds future prices of a commodity edging out with the cash price, he will take offsetting positions in both the markets to lock in a profit.
Why should I invest in commodities? I don’t have much knowledge about the same!! What are the benefits of trading in commodity futures?
Well, commodity derivatives platform is used by wider section of market participants, starting from investors, hedgers, arbitragers, traders, manufacturers, planters, exporters, importers etc.
Is demat account necessary to trade commodities?
It is not required. You need to open only a trading account with us for the same.
What is the trading timing of the commodity market in India?
The trading timings of MCX are (all IST):
Monday to Friday: 10:00am to 5:00pm. (Agri products)
Monday to Friday: 10:00am to 11:55pm. (Bullion n Metals)
Saturday: 10.00am to 2.00pm (all commodities)
Myths about commodity trading?
Myths.
Commodities markets are very difficult to grasp!!
It is a wrong notion that commodity markets are difficult markets and only experts can participate in this market. On the contrary, they are easier to understand as their movement is based on the demand and supply, and other economic factors.
This market is only for farmers and jewelers!!
This market is for everybody who wishes to utilize the market movement to their benefit, like the share market. There is no GHOST in this market!!Only one should spend some time in the market to know more about the same. Thatz it.
1991 saw a process of economic liberalisation in India. In later years, the government and the Forward Market Commission (the commodities market regulator) started to work for reforms in the commodity market. Came April 2003, almost all the commodities were allowed to be traded in the futures market. Multi-commodity exchanges at national level were created to start futures trading in commodities online, to make trading in commodity futures more clear and profitable. With so many commodities available for trading, trading in commodity futures market is being viewed as a significant business segment by many– businessmen, investors, institutions, brokers, banks etc.
Though a few years old, the organized Indian Commodity Market, is at its nascent stage and has a large potential to provide enormous opportunities to the investors and other market participants. The most prominent national level multi-commodity exchanges in India at present are the Multi Commodity Exchange (MCX) and the National Commodity & Derivatives Exchange (NCDEX). All the traditional and generation next commodity exchanges are regulated by the Forward Market Commission (FMC) under the Ministry of Consumer Affairs and Public Distribution.
Q.What is "Commodity"?
A. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade. The national commodity exchanges have been recognized by the Central Government for organizing trading in all permissible commodities which include precious (gold & silver) and nonferrous metals; cereals and pulses, oilseeds, oils and oilcakes, raw jute, sugar, gur, potatoes etc.
When did commodity trading start n where? When in India?
The first exchange was started in Chicago, America named Chicago Board of Trade (CBOT) in 1848. The Bombay Cotton Exchange founded in 1893 was the first organized commodity exchange in India. However, only few years back, the government came out with the concept of demutualised, electronic (on-line, screen-based), national level multi commodity exchanges as part of its agricultural and economic liberalization program. The most prominent national level multi-commodity exchanges in India at present are the Multi Commodity Exchange (MCX) and the National Commodity & Derivatives Exchange (NCDEX). All the traditional and generation next commodity exchanges are regulated by the Forward Market Commission (FM
Which commodities are traded on MCX?
( www.mcxindia.com/products_gold.html )
The following commodities are available in various categories:
- Bullion: Gold, Gold Mini, Silver, Silver Mini;
- Metals: Aluminum, Copper, Lead, Lead Mini, Zinc, Zinc Mini, Nickel;
- Energy: Crude Oil, Natural gas, Heating Oil;
- Oil and oil seeds: Refined Soy Oil, Crude Palm Oil, Mentha Oil;
- Other commodities :Cardamom,Jute, Kapas, Potato;
Basically there are three types of members who participate in trading futures. They are Hedgers, Speculators and Arbitragers.
Hedgers :
Hedgers are those who protect themselves from the risk associated with the price of an asset by using derivatives. In general, hedgers use futures for protection against adverse future price movements in the underlying cash commodity. Hedgers are often businesses, or individuals, who at one point or another deal in the underlying cash commodity.
Speculators:
Speculators, the second group of futures players, provide the much needed liquidity and hence are the backbone of the market. These participants include independent floor traders and investors. Speculators have certain advantages over other investments in a way that he can make more money in the futures market faster because prices tend, on average, to change more quickly.
Arbitrators:
Arbitrators are the person who takes the advantage of a discrepancy between prices in two different markets. If he finds future prices of a commodity edging out with the cash price, he will take offsetting positions in both the markets to lock in a profit.
Why should I invest in commodities? I don’t have much knowledge about the same!! What are the benefits of trading in commodity futures?
Well, commodity derivatives platform is used by wider section of market participants, starting from investors, hedgers, arbitragers, traders, manufacturers, planters, exporters, importers etc.
- Remember commodity trading moves around supply n demand concept. Seasonality pattern study should give a good picture as how a commodity moves in one particular season. Historical charts help to a great extent.
- There is no balance sheet, profit & loss statement as required for share trading. Moreover one need not think about any company internal affairs to trade in commodities!!!
Is demat account necessary to trade commodities?
It is not required. You need to open only a trading account with us for the same.
What is the trading timing of the commodity market in India?
The trading timings of MCX are (all IST):
Monday to Friday: 10:00am to 5:00pm. (Agri products)
Monday to Friday: 10:00am to 11:55pm. (Bullion n Metals)
Saturday: 10.00am to 2.00pm (all commodities)
Myths about commodity trading?
Myths.
Commodities markets are very difficult to grasp!!
It is a wrong notion that commodity markets are difficult markets and only experts can participate in this market. On the contrary, they are easier to understand as their movement is based on the demand and supply, and other economic factors.
This market is only for farmers and jewelers!!
This market is for everybody who wishes to utilize the market movement to their benefit, like the share market. There is no GHOST in this market!!Only one should spend some time in the market to know more about the same. Thatz it.