CommoditY – Where Gold, Oil & Wheat Meet Profits! -

Commodities: Where Gold, Oil & Wheat Meet Profits! 📦

Did you know?

You don’t need to own a barrel of oil or a kilo of gold to profit from it. You can trade them just like you trade stocks or F&O contracts!

In our previous article on Futures & Options (F&O), we discussed how you can trade contracts based on future prices of stocks or indices.

👉 Commodities take this one step further — allowing you to trade physical goods like gold, silver, crude oil, natural gas, wheat, cotton, and more — all through commodity exchanges, without ever touching the actual product!

What is Commodity Trading?

Commodity trading involves buying and selling raw materials or primary products through futures contracts on exchanges like:

Exchange	Full Form	Focus
MCX	Multi Commodity Exchange	Metals, Energy
NCDEX	National Commodity & Derivatives Exchange	Agri Commodities

Commodity vs F&O: What’s the Difference?

Feature	F&O (Stocks/Indices)	Commodities
Underlying Asset	Stocks/Indices	Physical goods (Gold, Oil, etc.)
Exchanges	NSE, BSE	MCX, NCDEX
Participants	Traders, Hedgers, Speculators	Farmers, Producers, Traders
Delivery Option	Mostly cash settled	Physical delivery possible
Volatility	Moderate	High (especially in crude/gold)

Types of Commodities Traded

Commodities are mainly categorized into:

1. Bullion – Precious Metals
- Gold
- Silver
🔸 Example: Gold Futures are one of the most traded contracts in MCX.
2. Energy
- Crude Oil
- Natural Gas
🔸 Example: Oil prices fluctuate based on global supply-demand, OPEC decisions, and war news.
3. Agri Commodities
- Wheat
- Soybean
- Cotton
🔸 Example: Farmers hedge price risk by selling Cotton Futures on NCDEX.
4. Base Metals
- Copper
- Aluminium
- Lead, Nickel, Zinc
🔸 Example: Manufacturers hedge copper price rise by buying copper futures.

How Does Commodity Trading Work?

Like F&O, commodity trading is mostly done via futures contracts. Here’s a simple flow:

1. Trader A expects Gold prices to rise.
2. Buys 1 Gold Futures Contract at ₹60,000.
3. If Gold rises to ₹61,000 — Trader A books ₹1,000 profit.
4. If Gold falls — he faces a loss.

Who Trades Commodities?

Trader Type	Purpose
Hedgers	Farmers, companies managing price risk
Speculators	Profit from price fluctuations
Arbitrageurs	Profit from price differences across markets

Benefits of Commodity Trading

🔄 Diversification from stocks & F&O
⚡ High Volatility = High Profit Potential
💰 Hedge against inflation (especially Gold)
📈 Global Influence = More Opportunities

Risks to Remember

❗ High leverage = higher risk
🌍 Global news affects prices (war, weather, policy changes)
📅 Expiry-based contracts – careful with timing

Real-Life Example

Imagine a jeweller expecting gold prices to rise in the next 2 months.

He can buy gold futures today at ₹60,000 and lock the price, avoiding risk of buying at ₹63,000 later.

How to Start Commodity Trading in India

1. ✅ Open a commodity trading account with a broker (like Zerodha, Angel One, Upstox).
2. 🔁 Enable MCX segment (for metals & energy) or NCDEX (for agri).
3. 📊 Understand lot sizes, margin requirements.
4. ⚙ Use analysis tools (technical & fundamental) before trading.

Conclusion

Commodity trading gives you a powerful way to diversify your portfolio — whether you’re bullish on gold, riding the wave of crude oil, or speculating on wheat prices.

As we’ve seen, it works similarly to F&O but with real-world goods as the underlying.

🎯 Coming Up Next: We’ll explore how currency trading works and how you can profit from exchange rate fluctuations between USD, INR, and more!

“Trading is not about being right; it’s about managing risk and following your system with discipline.” — Option Insights

If you’re starting, begin with small capital, learn with demo trading, and understand both the technical and emotional side of trading.

Start Your Trading Journey