How to Trade In commodity | What is Commodity | Commodity trading In India (2024)

FAQs

How to trade in commodities in India? ›

Demat and trading accounts are mandatory for trading in the commodity market. If you are considering opening a Demat and trading account, you need to submit your PAN card, Aadhar card, age proof, income proof, and bank account statement.

Commodity trading strategies are usually based on either technical analysis, fundamental analysis or a mixture of the two. In order to have the best chance of successfully trading commodities, it's a good idea to incorporate some form of fundamental analysis, as commodity prices tend to be sensitive to global events.

There is no fixed amount for investing in commodities. It is mainly concerned with the type of commodity in which investment is made. However, Rs. 10 000 will be a good amount to start with.

How do I start trading commodities? First, choose from 35 commodity markets, or commodity-linked stocks and ETFs. Next, decide whether to speculate on market prices by going long or short. And finally, you'd need to open a live account with a provider who offers commodity trading.

Commodity Market Trading Mechanism

It involves: Spot Market: In the spot market, physical commodities are bought and sold for immediate delivery. Supply and demand influence price dynamics. Futures Market: Futures contracts represent agreements to buy or sell commodities at a pre-agreed price on a future date.

The defining feature of day trading is that traders do not hold positions overnight; instead, they seek to profit from short-term price movements occurring during the trading session.It can be considered one of the most profitable trading methods available to investors.

Apart from equities, investors can also trade commodities in the market. This way, investors can easily diversify their investment portfolio and increase their profits. Moreover, commodities can generate great returns in the long term when people invest with prudence.

One of the most common options strategies would be to buy calls and puts at the same time to profit from changes in market volatility. Generally, commodity traders adopt long positions when they anticipate market volatility. However, when traders feel that volatility would be normal, they take a short position.

How much money do I need to trade commodities? ›

Unlike stock trading or investing in mutual funds or ETFs, commodity trading offers tremendous leverage. In trading commodity futures, you typically only have to put up about 10% of the total contract value. This enables you to make much higher percentage gains with your trading capital.

Key Takeaways

Commodities are considered risky investments because the supply and demand of these products are affected by events that are difficult to predict, such as weather, epidemics, and natural and human-made disasters.

Profits from online commodity trading are subject to income tax at your normal rate. There is no tax on the losses. When paying taxes on commodity investments, it's important to know how to deduct your trading losses and gains. For this, you'll need to calculate your net profit or loss for the year.

There is no minimum amount that you need to trade in the stock market. India has two main stock exchanges—the Bombay Stock Exchange and the National Stock Exchange. Stock prices range between ₹1 to ₹75,000. You can buy any stock in any quantity.

To trade in commodity through Zerodha, you need to have a Commodity trading account with Zerodha. If you already have an Equity trading and Demat account, you need to activate the commodity trading segment through Zerodha Console. Zerodha does not offer only Commodity trading account to clients.