How to Trade in MCX?

Commodity trading allows investors to participate in price movements of commodities like gold, silver, crude oil, natural gas, and base metals. In India, this trading happens primarily on the Multi Commodity Exchange of India (MCX).

If you’re new to commodity trading, this guide explains how to trade in MCX step by step, along with key concepts, risks, and best practices.

What Is MCX?

MCX (Multi Commodity Exchange of India) is India’s largest commodity derivatives exchange where traders buy and sell commodity futures contracts.

Popular commodities traded on MCX include:

• Gold
• Silver
• Crude Oil
• Natural Gas
• Copper
• Zinc
• Aluminium

MCX provides a transparent, regulated platform for commodity price discovery.

How MCX Trading Works

MCX trading is based on futures contracts, which are agreements to buy or sell a commodity at a predetermined price on a future date.

Key points:

• You don’t buy physical commodities
• Trades are settled in cash or by compulsory square-off
• Margin-based trading allows leveraged positions
• Prices move based on global demand, supply, and geopolitical factors

Step-by-Step: How to Trade in MCX

Step 1: Open a Commodity Trading Account

You need:

• A demat account with JM Financial Services
• A commodity trading account with MCX access
• Bank account linked to trading account

Most brokers allow equity + commodity trading under one login.

Step 2: Activate MCX Segment

Request your broker to activate:

• Commodity derivatives segment
• MCX trading permissions

This is usually enabled within 24–48 hours.

Step 3: Understand Contract Specifications

Before placing any trade, check:

• Lot size
• Expiry date
• Tick size
• Margin requirement

For example:

• Crude Oil: Large volatility, high margin
• Gold: Lower volatility, safer for beginners

Step 4: Fund Your Trading Account

Deposit margin money as required by MCX and your broker.

Commodity trading works on SPAN + Exposure margin, not full contract value.

Step 5: Place Your Trade

You can:

• Buy (long) if you expect prices to rise
• Sell (short) if you expect prices to fall

Orders can be:

• Market order
• Limit order
• Stop-loss order

Step 6: Monitor & Exit the Trade

• Square off before expiry
• Or broker may auto-square on expiry day
• Use stop-loss to manage risk

MCX Trading Timings

• Monday to Friday
• Morning session: 9:00 AM – 5:00 PM
• Evening session: 5:00 PM – 11:30 PM / 11:55 PM (DST dependent)

Evening session aligns with global commodity markets.

Commodities Suitable for Beginners

If you’re starting out, consider:

• Gold Mini / Micro
• Silver Mini
• Natural Gas (with strict stop-loss)

Avoid highly volatile contracts initially.

Advantages of Trading in MCX

• Ability to profit from rising and falling markets
• Portfolio diversification beyond equities
• High liquidity in major contracts
• Global price linkage
• Transparent pricing

Risks Involved in MCX Trading

• High volatility
• Leverage can amplify losses
• Global news impact
• Margin calls during adverse moves
• Not suitable for risk-averse investors

MCX Trading vs Equity Trading

Parameter	MCX Trading	Equity Trading
Asset Type	Commodities	Shares
Leverage	High	Low
Volatility	High	Moderate
Holding Style	Short-term	Short & Long-term
Risk Level	High	Moderate

Taxation on MCX Trading

• MCX trading income is treated as business income
• Taxed as per income tax slab
• Losses can be set off and carried forward
• ITR-3 is applicable

(Consult a tax advisor for accurate filing.)

Tips for Beginners in MCX Trading

• Start with small lot sizes
• Always use stop-loss
• Avoid overtrading
• Track global news and inventory data
• Don’t hold positions without understanding expiry

Final Thoughts

MCX trading offers exciting opportunities but comes with significant risk. Beginners should focus on learning contract mechanics, risk management, and disciplined trading before scaling up.

Commodity markets reward knowledge and patience — not guesswork.

FAQs

1️. Is MCX trading legal in India?

Yes, MCX trading is legal and regulated in India.

2️. Do I need a demat account for MCX trading?

Yes, you need a demat account and a commodity trading account with MCX access.

3️. Is MCX trading risky for beginners?

MCX trading involves high volatility and leverage. Beginners should start small and focus on risk management.

4️. What is the minimum investment required for MCX trading?

The minimum investment depends on the commodity and margin requirement. It can range from a few thousand to higher amounts for large contracts.

5️. Can I trade MCX intraday?

Yes, MCX contracts can be traded intraday and squared off on the same day.

6️. What happens if I don’t square off before expiry?

Most brokers auto-square positions before expiry. Some contracts may lead to compulsory settlement.

7️. Which commodity is best for beginners in MCX?

Gold Mini or Silver Mini are generally considered more suitable due to relatively lower volatility.