Commodity trading is on a major rise in the country. Multi Commodity Exchange (MCX) is India’s leading commodity derivatives exchange with an impressive market share of about 96.4% in terms of the value of commodity futures contracts traded in the financial year 2022-23 April to June.
You will be surprised by reading the highest daily turnover of MCX since inception which is INR 119,941 crore. Yes, you read it right!
Even though millions of trades take place through the commodity exchange every day, still not many people are confident and aware of the commodity stock exchange.
So, let us take you through the details of what is MCX.
What is MCX Market?
MCX is India’s first commodity derivative exchange that began its operations in 2003. Just like the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), MCX is governed by the Securities and Exchange Board of India (SEBI). MCX functions just like the other stock exchanges where you can buy or sell commodities like metals, energy, agriculture, etc.
Which Commodities are Traded in MCX?
There are four types of commodities traded in MCX:
· Agriculture based commodities like rice, pulses, grains, edible oils, cotton, spices
· Energy commodities like crude oil, coal, natural gas
· Base metal commodities like aluminum, nickel, steel, lead, zinc, tin, copper
· Precious metal commodities like gold, silver
The exchange has a total of 12 commodity groups. Apart from these groups, commodities like refined sugar, coffee and white sugar are also traded.
What is MCX Trading?
MCX provides traders a platform to buy and sell spot, future or option contracts of different commodities. To trade over the MCX platform you must have a demat account. Earlier the retail participants were not allowed by SEBI to directly participate in commodity markets. However, now retail participants can trade in commodities through the MCX using their regular demat accounts.
What are the MCX Trading hours?
MCX trading takes place between 9 am IST and 11.30 pm IST from Monday to Friday. However, between November and March, the end time is changed to 11.55 pm.
How Can You Trade in MCX Market?
There are two major ways through which you can trade in the commodity market:
·Futures Contract
It is an agreement between the buyer and seller where a buyer agrees to purchase a specific quantity of a commodity at a predetermined price and on a predetermined future date.
· Options Contract
It is a contract wherein the buyer has the right but not the obligation to purchase or sell the commodity at a fixed price.
What Factors Affect Commodity Market?
There are various factors that affect the prices of commodities on the MCX. These include demand and supply, geopolitical factors, weather conditions, economic and political conditions, cost of raw materials, government policies, and technological developments
How Can You Start Trading on MCX?
Since now you are aware of important details about MCX, we move on to listing down the details regarding how you can start trading on MCX.
· Select Stock broker
To begin trading on the MCX you need to select an MCX registered stockbroker. There are many brokers in the market providing different services. You may select a broker that fulfils all your requirements at the best possible price. You may choose Indira Securities to open a demat account for MCX trading as we are a customer-focused broking company.
· Fill the Application
After selecting the stockbroker, fill out the application form for trading in the commodity markets. Fill in the information correctly and submit the KYC documents that include income proof, identification proof, address proof, etc.
· Verification
The broker carries out in-person verification to check the legitimacy of the information submitted. Most brokers provide this service online as well. After the verification process is successful, your account is ready to trade in the MCX. You must make a margin payment to the broker before taking any trading position.
Bonus Tip: While trading in the commodity market you must learn to be patient and consider investing slowly. Try to diversify your investments as much as you can. Do not follow others blindly, pick trades as per your study and knowledge and if you are a beginner, do not hesitate to ask for help wherever it is required.
Wrapping it up
The MCX is one of the safest and most transparent commodity exchanges that adhere to the regulatory environment. One of the major benefits of trading in the commodity market is that you can purchase precious commodities like gold or silver in electronic form. You are no longer required to hold them physically. Commodity also diversifies your investment portfolio. Many investors use commodities trading for hedging their risk.