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Commodity Trading

What Is Commodity Trading? With Real-World Example

Writer
Santosh Meena
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July 31, 2025
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Quick Takeaways

  • Commodity trading lets you buy/sell goods like gold, crude oil, and wheat.
  • Major exchanges: MCX (for metals, energy) &NCDEX (for agri commodities).
  • SEBI regulates commodity trading to ensure safety.
  • Swastika Investmart offers trusted, research-backed trading platforms.
  • It can hedge inflation and diversify a retail investor’s portfolio.

 What Is Commodity Trading? (With Real-World Example)

Imagine you believe the price of gold is going to rise next month. Instead of buying physical gold, you can trade gold futures — a standardized contract to buy gold at a fixed price in the future. If your prediction is right, you make a profit. This is the essence of commodity trading.

In India, commodities are traded digitally — no need to physically own oil or wheat. Traders speculate on price movements through exchanges like MCX (Multi Commodity Exchange) and NCDEX (National Commodity & Derivatives Exchange).

✅ Commodity trading covers:

  • Hard Commodities: Crude oil, gold, silver, natural gas.
  • Soft Commodities: Cotton, coffee, wheat, soybeans, guar seed.

🔍 Why Should Indian Retail Investors Care?

Hedge against inflation: Commodity prices often rise when inflation spikes.

Diversification: Helps spread investment risk beyond stocks and mutual funds.

Speculative Gains: Short-term traders can profit from price movements.

Global Exposure: Especially via crude oil, gold, and base metals.

📌 Example: In 2022, when crude oil surged due to the Russia-Ukraine war, Indian commodity traders on MCX made significant gains from price swings — without ever touching a drop of oil.

🏛️ How Does Commodity Trading Work in India?

1. Exchanges You Trade On

India has two SEBI-approved commodity exchanges:

  • 🏦 MCX: Trades metals (gold, silver), energy (oil, gas).
  • 🌾 NCDEX: Focused on agricultural commodities.

These exchanges function like stock exchanges but for goods. You don’t take delivery (unless you want to); trades are settled digitally.

2. Contracts: The Heart of Trading

You trade commodity futures — contracts to buy/sell a commodity at a future date. For instance, a Gold Mini August Futures contract means you’re trading 100 grams of gold, deliverable in August.

Contracts are standardized by:

  • Lot size (e.g., 1 kg silver)
  • Expiry date
  • Tick size (minimum price movement)

3. Margin Trading: Low Investment, High Leverage

You don’t need the full contract amount. Just a margin — usually 5–10% — to enter the trade.

⚠️ Example: If a gold futures contract is worth ₹5,00,000, you might only need ₹25,000–₹50,000 as margin. But with leverage comes risk. Sudden price dips can wipe out your capital.

✅ Is Commodity Trading Legal & Safe in India?

Absolutely — but only via SEBI-registered brokers and regulated exchanges. You must:

  • Open a commodity trading account
  • Complete KYC (PAN, Aadhaar, bank proof)
  • Link to a demat account (CDSL/NSDL)Tick size (minimum price movement)

🛡️ As an established SEBI-registered broker since 1992, Swastika Investmart provides a transparent, regulated, and research-backed trading ecosystem, ensuring investor trust and protection.

🔑 Steps to Start Commodity Trading with Swastika Investmart

Step 1: Sign Up for a Free Trading Account

You can register online in minutes with your PAN, Aadhaar, and a photo.

Step 2: Verify Your KYC

Swastika offers paperless e-KYC through DigiLocker and webcam verification.

Step 3: Fund Your Account

Add money via UPI, net banking, or IMPS.

Step 4: Research & Trade

Use Swastika’s in-house research, charting tools, and mobile apps to place your first trade in gold, silver, or crude oil.

📊 Top Commodities Traded on MCX (2024)

Commodity ypical Lot Size Volatility Popularity

Gold

1 kg / 100 gm

Medium

⭐⭐⭐⭐

Silver

30 kg

High

⭐⭐⭐⭐⭐

Crude Oil

100 barrels

Very High

⭐⭐⭐⭐⭐

Natural Gas

1,250 mmBtu

High

⭐⭐⭐⭐

Cotton

25 bales

Medium

⭐⭐⭐

🧠 Tips for Beginners in Commodity Trading

  • 🔍 Always research fundamentals (supply-demand trends, weather patterns, geopolitics).
  • 📈 Use stop-loss orders to limit risk.
  • 🧾 Track contract expiry dates to avoid physical delivery.
  • 📚 Educate yourself with Swastika’s webinars, market updates, and analyst reports.

🚫 Common Myths About Commodity Trading

Myth Truth

You need a lot of capital

Not true — margins start from ₹5,000

It’s gambling

Commodity prices are influenced by real-world supply/demand

Only experts can trade

With research & support, even beginners can start safely

👨 Why Choose Swastika Investmart for Commodity Trading?

  • SEBI-registered since 1992

  • Member of MCX & NCDEX

  • Trusted by 1 lakh+ Indian investors

  • Mobile + desktop platforms

  • Real-time research + advisory
  • ✅ Local support from over 100 branches

💡 Whether you're looking to diversify your portfolio or hedge against inflation, Swastika makes commodity trading accessible, secure, and insightful.

🏁 Conclusion

Commodity trading in India is no longer just for institutions. With the right broker, tools, and risk management, even first-time investors can participate safely and smartly.

Swastika Investmart combines regulatory trust, technology, and market research to empower you in the world of gold, oil, and agriculture futures. Now is a great time to open your commodity account and start small, learn fast, and grow wisely.

🔗 Ready to Begin?

👉 Open Your Commodity Trading Account with Swastika Investmart Today

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