Last updated on 25th May 2019
by Team Top Share Brokers
Commodity trading is nothing but trading in commodity spot and derivative Futures and Options. Commodity Options trading on MCX is recently launched in India. The retail investor should understand that the returns from commodity trading depend on the price change of the respective commodity and it's a variant of demand and supply. As the demand for any product increases, the price also increases and oversupply of any product leads to falling in its price.
Commodity Trading in India can be done on Commodity Exchanges. Multi-Commodity Exchange (MCX) and National Commodity and Derivative Exchange (NCDEX) are two major commodity exchanges in India along with other exchanges. Gold, silver, agri-commodities, including grains, pulses, spices, oils and oilseeds, Mentha oil, metals, and crude oil are some of the commodities that these exchanges deal in. Gold is the most traded contracts on MCX. There are different gold contracts available to trade in. Gold (The Big Gold), Gold Mini, Gold Guinea, and Gold Petal.
The Commodity Derivative market in India is regulated by SEBI. Margin money is required upfront to take positions in commodity futures contracts. Margin percentage varies between 4% to 10%, depending upon various factors.
You need a broker who is members of these commodity exchanges to trade in commodities. You have to open a separate commodity trading account or request specifically (in case of a new account) separately (in case of existing accounts) to trade in the commodity. Most full-service brokers (like Sharekhan, Angel Broking, Motilal Oswal, Motilal Oswal, Edelweiss Broking, etc) offer commodity trading and add on services like research reports, tips & recommendations and relationship managers to facilitate your trading. A brokerage charge by them is a percentage based on lot size. Discount brokers (like Zerodha, Upstox, SAMCO, SAS Online, 5paisa, etc.) charge a flat fee whether you buy 1 lot or 10 lots.
Commodity trading was not available with the brokers that are associated with Banks or providing 3-in-1 accounts (ICICI Direct, HDFC Securities, SBI Securities, Axis Direct, Kotak Securities). After changes in SEBI guidelines, Axis Direct started Commodity trading on MCX in 2018. They have membership with MCX.
Most of the brokers offer commodity trading online through their trading website, mobile trading apps and desktop trading software. Commodity trading account opening online is a hassle-free process nowadays. To open an instant online commodity trading account, you will need an Aadhar card with your current mobile number linked with it and PAN card. You can download the account opening form from the broker's website, fill it and send it with all the documents. Once your commodity account is open and active, the broker will send you an email with details of login id and password for your commodity trading account with them.
Below you will see "The Best Commodity Brokers in India" or "The Best Brokers for Commodity Trading in India" or "Top 5 Commodities Brokers in India" but we will recommend you to choose wisely based on your preferences:
Zerodha is the leading broker at present who you can trust and bank on for all your commodity trading needs. They have the education to the well-designed trading platform to low brokerage, all you need for trading smoothly. Zerodha doesn't allow you to get into the physical delivery of commodities. So you will be forced to close the position before 1st of the expiry month.
Benefits of commodity trading with Zerodha:
5paisa is fastest growing discount brokers who is offring flat fee brokerage of Rs 10 per executed order, provide Commodity Trading service in same flat fee plan. The broker has roubest trading platform, product and service to offer and support team.
Benefits of commodity trading with 5paisa:
Angel Commodities Broking Pvt Ltd is a member of MCX & NCDEX and allows trading in all the commodities. Angel is a full-service broker and provides all basic services like online trading, call, and trade, tips, and recommendations by a special team of research analysts.
Benefits of commodity trading with Angel Broking:
ShareKhan is the leading full-service broker offering equity and commodity trading on one platform. The broker offers commodities trading facilities on MCX and NCDEX at the brokerage of .1%.
Benefits of commodity trading with ShareKhan:
Tradeplus provides commodity trading in non-agri products at the lowest brokerage cost with a monthly plan but doesn’t provide any RM, research, tips or recommendation.
Benefits of commodity trading with Tradeplus:
In contrary to equity settlement, in commodities the settlement is physical and therefore 'delivery' is compulsory. However, you can square off your position at 1st of the expiry month to avoid physical delivery of a commodity. In order to get the delivery of the commodity, one has to express his intention to do so. This has to be done any time before 4 days to expiry. So, given that the expiry is on 5th, one has to express his intent to take delivery anytime on or before 1st.
Key Advantages of Commodity Trading: