What is Commodity Trading?

Commodity trading is the buying or selling of commodities. They are a category of asset/goods (usually natural resources) which:

  • Holds commercial value in our day-to-day life

  • Are Exchangeable

  • Are moveable from one place to another

Commodity trading is the trading (buying or selling) of these commodities. In simple words, like stocks are traded in equity trading, goods are traded in commodity trading. This trading takes place on a commodities exchange, wherein various commodities and/or their derivative products are traded (i.e. bought or sold).

Commodity Trading in India

The Indian commodity trading market dates back to 1875. The major commodity trading exchanges in our country are:

  • Multi Commodity Exchange of India (MCX)

  • National Commodity and Derivatives Exchange (NCDEX)

  • Indian Commodity Exchange Limited (ICEX) *

Many regional exchanges also provide trading in commodity futures. MCX is the largest (trade volume wise) commodity derivative exchange in India. TradeSmart offers online trading facility in MCX.

*National Multi Commodity Exchange of India Ltd (NMCE) got merged with ICEX in 2018.

Exchange based commodity trading in India can happen either in the spot market or the futures market. The trading in the spot market happens instantly and is done in exchange for cash. Physical commodity trading companiesensure immediate delivery through actual delivery (or the exchange of warehouse receipts till such delivery).In the futures market, transaction is done electronically wherein the buyer and seller agree to fulfill their obligations at a future date and specific price.Commodities Options Trading India was approved in 2017. Gold futures were the first commodity option to get traded.

Types of Commodities

Commodities can be broadly divided into two groups – soft and hard.

What is a soft commodity?

Soft commodities are grown and are perishable or have a shorter life span. For instance, rice, wheat, spices, etc. The prices of soft commodities are prone to fluctuations.

What is a hard commodity?

Hard commodities, on the other hand, are extracted or mined. For instance, oil, aluminum, etc. the market for hard commodities is generally less volatile in the short run.

Things to keep in mind before you trade in commodity

While investing in commodities, you need to remember that there is no “best” strategy that will work for everyone. A good and balanced commodity trading strategy is one which takes into account the below factors:

  • Prevailing trends

    (medium as well as long-term) as they can be good pointers for probable market movements.

  • Technical indicators

    Indicators such as moving averages, etc as they can help you take your exit/entry decisions.

  • Market research

    Research backed decisions rather than emotions. Focused investments and patience go a long way in generating lucrative returns in this market.

  • Seasonality

    Demand and supply of certain commodities depend on seasons and hence the price levels also fluctuate accordingly.

How to open commodity trading account with TradeSmart?

Step 1

Fill up the account form Online or Offline.

Step 2

We Verify your application and the documents.

Step 3

Your account is Open and we send the trading account details using which you can Start trading

Our customers love trading via TradeSmart. Every single day.

Benefits of opening commodity trading account with Tradesmart

Commodities Trading

Smart technology

At TradeSmart you benefit from implementation of cutting-edge technology in processes, tools and
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Commodities Trading

Technical Analysis

Technical analysis is like reading the horoscope prediction for price movements, albeit with more surety.
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Commodities Trading

Continuous operational support

The TradeSmart team is there with you at all steps in the commodity trading journey. Whether it is opening
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Commodities Trading

Cost-effective

TradeSmart is one of the most cost-effective trading companies in India.
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Common questions

Commodity trading in India takes place on all business days (between Monday to Friday). The trading hours depend on the exchange. For instance,

  • MCX – 9am to 5pm (agri commodities) / 11.30pm* (non-agri commodities)
  • NCDEX – 10 am to 11.30pm
  • ICEX -9am to 5pm (agri commodities) /11.30pm* (non-agri commodities).

Commodity Trading in India can be grouped into five major categories-

  • Precious metals / bullion – Gold, silver
  • Metals – Copper, brass, aluminum etc
  • Energy – Natural gas, Crude oil, etc.
  • Agriculture and allied activities – Grains, oil, spices, pulses and livestock
  • Services – Mining service, oil services, etc.

There are two kinds of options – American (parties can exercise their buying or selling right before the expiration date) and European (parties can exercise their right only on the date of option contract expiration). In Indian commodity trading, only European style options are permitted.

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