Commodity Trading for Beginners: How to Trade Commodities in India

What is commodity trading?

Commodity trading is the buying and selling of contracts whose value comes from a raw material, such as metals, energy products or agricultural goods. Retail traders in India do not take delivery of the goods. They trade futures contracts on MCX and profit or lose from the change in price between entry and exit.

Commodities are usually grouped into precious metals, energy, base metals and agricultural products. Most intraday traders in India focus on a few highly traded MCX contracts because they have high volume and move enough during the day to offer clear setups.

Every futures contract has an expiry date, a lot size and a tick value. Before you place any trade, you should know exactly how many rupees you gain or lose when the price moves by one point. That single habit prevents most beginner mistakes.

How does the commodity market in India work?

The commodity market in India runs mainly on MCX, with some contracts on NSE. Since 2015 it has been regulated by SEBI, the same regulator as the stock market. You need a trading account with commodity segment activated at a SEBI-registered broker, then you trade standardised futures and options contracts.

MCX is usually open from 9:00 AM to 11:30 PM on weekdays, and up to 11:55 PM for internationally linked commodities when US daylight saving time applies. The long session means many people with day jobs trade commodities in the evening.

Prices of many MCX commodities follow international prices, adjusted for import duty and the rupee. This is why big global news, such as US inflation data or OPEC decisions, can move MCX prices sharply even late in the evening.

Lot size and what one point is worth

Every MCX contract has a lot size, and the lot size decides how many rupees you gain or lose when the price moves by one point. Beginners should start with the mini or micro version of a contract, because each point is worth far less, often ₹1 to ₹10 per lot instead of ₹100.

• Big contracts: often about ₹100 per 1-point move per lot
• Mini contracts: often about ₹10 per 1-point move per lot
• Micro contracts: often about ₹1 to ₹5 per 1-point move per lot
• Always check margin, expiry and the exact value per point before your first trade

Contract specifications can change. Always confirm the current lot size, margin and expiry on the MCX website or with your broker before trading.

How to start commodity trading: a 6-step plan

Start by learning, not by trading. Open a commodity-enabled account with a SEBI-registered broker, study one strategy, paper trade it for at least 30 to 50 trades, fix a maximum risk per trade of 1 to 2 percent of capital, then trade the smallest contract size and keep a journal of every trade.

• Learn the basics: futures, lot size, margin, expiry and tick value.
• Pick one market (one liquid mini contract) and one timeframe.
• Learn one rule-based strategy with clear entry, stop loss and target rules.
• Paper trade or trade the smallest size until you have 30 to 50 recorded trades.
• Fix your risk: never risk more than 1 to 2 percent of capital on a single trade.
• Review your journal every week and change only one thing at a time.

Is commodity trading risky?

Yes. Commodity futures are leveraged, so a small price move can cause a large loss compared with your margin. SEBI studies show that most individual traders in derivatives lose money. Trading is suitable only for money you can afford to lose, with a written plan and a stop loss on every position.

SEBI's 2024 study of the equity futures and options segment found that about 93 percent of individual traders made losses between FY22 and FY24. A separate SEBI study found that about 7 in 10 individual intraday traders in the equity cash segment lost money in FY23. Commodity futures carry similar leverage risk, so education and risk control come first.

The Millionaires Floor teaches trading as a skill. We do not give tips, guaranteed returns or investment advice.

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