Commodity trading is the buying and selling of raw materials such as gold, silver, crude oil, natural gas, copper and farm products. In India, most traders do this through futures and options contracts on SEBI-regulated exchanges like MCX, rather than buying the physical goods.
Quick answer: commodity trading in India
In most cases, you trade contracts linked to a commodity’s price, not the commodity itself.
Contracts trade on MCX, NCDEX, NSE and BSE, all regulated by SEBI.
Each contract has a fixed lot size and an expiry date.
Futures and sold options need a margin deposit. Option buyers pay the premium, though in-the-money options can attract extra margin near expiry.
Bullion (gold and silver) and energy (crude oil and natural gas) make up most of MCX’s trading.
You need a trading account with the commodity segment turned on.
Leverage makes gains and losses bigger, so test your strategy and size positions carefully.
Learn commodity trading before you risk real money. Sign up free on AlgoTest to replay past MCX sessions, estimate margins and backtest strategies.
How Commodity Trading Works
A commodity futures contract is an agreement to buy or sell a fixed quantity of a commodity at a set price on a future date. You do not pay the full value upfront. Instead, you deposit margin, and your profit or loss changes every day as the price moves.
These are the terms you will see on every contract:
Lot size is the fixed quantity in one contract, such as 100 barrels of crude oil or 1 kg of gold. Our MCX lot size guide lists every contract.
Margin is the deposit futures traders and option sellers keep with their broker. Our MCX margin guide explains how it is set.
Premium is the price an option buyer pays upfront instead of margin.
Expiry is the date the contract ends. Most traders close or roll their positions before then.
Settlement is how the contract ends. On MCX, crude oil and natural gas futures are settled in cash, while gold, silver and base metal futures settle by physical delivery.
Commodity options on MCX are options on futures, so the underlying is a futures contract, not the physical commodity. Our guide to the MCX option chain shows how to read them.
Types of Commodities Traded in India
Bullion and energy dominate. In Q1 FY27, gold, silver and crude oil together made up about 81% of MCX futures turnover. Our guide to the best commodities to trade in India compares the top five.
SEBI has suspended futures trading in seven farm commodities, including wheat, chana and mustard seed, until March 31, 2027.
Where Commodities Trade in India
MCX (Multi Commodity Exchange) is India’s largest commodity exchange, with most trading in metals and energy.
NCDEX focuses on agricultural commodities.
NSE and BSE also run commodity derivatives segments.
SEBI has regulated commodity exchanges since 2015, when the Forward Markets Commission merged into it.
Our comparison of commodity exchanges in India covers how they differ.
Spot vs Futures vs Options in Commodities
Our guide to the difference between futures and options explains each in more detail.
A Simple Commodity Trading Example
Say MCX crude oil futures trade at ₹9,500 per barrel. One lot is 100 barrels, so the contract is worth ₹9,50,000, but you only deposit the margin.
If the price rises to ₹9,600, a buyer of one lot gains ₹10,000 before brokerage, taxes and other charges.
If the price falls to ₹9,400, the same buyer loses ₹10,000, plus charges.
A seller of one lot sees the opposite result.
This is an example only, and prices change constantly. Our crude oil lot size guide covers the smaller Crude Oil Mini contract, which moves one-tenth as much.
See how a real crude oil session played out. Replay a past MCX session in the AlgoTest Option Simulator and watch how an options position’s P&L changes as the price moves.
Commodity Trading Hours and Holidays
MCX metals and energy trade from 9:00 AM to 11:30 PM, or until 11:55 PM when US daylight saving time ends.
Most agricultural contracts trade from 9:00 AM to 5:00 PM, and a few trade until 9:00 PM.
On many exchange holidays, MCX closes only the morning session and opens again at 5:00 PM.
See MCX trading time for the full schedule and the MCX holiday list for closures.
Costs of Commodity Trading
Brokerage: Many discount brokers charge a flat fee per order. Our list of commodity brokers in India compares their charges.
Commodities Transaction Tax (CTT): 0.01% on the sell side of non-agricultural futures and 0.05% on the sell side of options premium. When an option is exercised, the buyer pays 0.0001% of the settlement price instead. Farm commodities on the exempt list carry no CTT.
Other charges: Exchange transaction charges, SEBI fees, GST and stamp duty.
Taxes: Profits from commodity derivatives traded on a recognised exchange are generally treated as non-speculative business income. Check with a tax professional for your situation.
Before you trade, estimate the margin for MCX contracts in the AlgoTest margin calculator, then confirm it with your broker.
How to Start Commodity Trading in India
Choose a SEBI-registered broker that offers commodity trading. Our guide to commodity trading apps and platforms can help you compare them.
Open a trading account, or turn on the commodity segment in your existing one. Brokers usually ask for income proof before allowing derivatives trading.
Learn the contract you want to trade: its lot size, tick value, expiry and settlement method.
Check the margin required, and keep extra funds for bad days.
Practise on past data and test your rules before trading live.
Before you pick a contract, work out how much one lot could lose if the price moves against you, and check that the contract trades actively. Smaller contracts like Gold Mini or Crude Oil Mini lower the amount per lot, but even they can be too big for some budgets.
Risks of Commodity Trading
Leverage: Because you only deposit margin, a small price move can mean a large gain or loss compared with the money you put in.
Global events: OPEC decisions, US economic data, wars and the rupee-dollar rate can all move prices sharply.
Price gaps: Commodity prices can jump between sessions, especially around global news in the evening.
Delivery: Holding gold, silver or copper futures into the tender period can lead to physical delivery.
Thin trading: Smaller contracts can have wide bid-ask spreads.
Our guide to trading risk management rules shows how to set limits before you trade.
Commodity Trading vs Stock Trading
Test Commodity Strategies on AlgoTest
AlgoTest gives you one place to plan, test and run MCX strategies:
Backtest:Backtest strategies on historical crude oil, natural gas, gold and silver data. A backtest shows how a strategy performed and how deep its drawdowns went, though it cannot predict future results. Each report, one of the most detailed available to Indian options traders, shows P&L, win rate, risk-reward ratio, maximum drawdown, streaks, Monte Carlo analysis and trade logs.
Simulate: Replay past MCX sessions in the Option Simulator to practise entries and exits without risking money.
Build: Plan option positions and check their payoff in the AlgoTest Strategy Builder, with the MCX option chain available on AlgoTest plans.
Go live: When your rules are ready, run MCX strategies live through Zerodha. Our guide to the best MCX algo trading software compares the options.
Test your first commodity strategy on past data. Sign up to get 100 Backtests free/month
Start Commodity Trading With a Tested Plan
Commodity trading gives you access to global markets like gold, crude oil and copper from one Indian trading account, but leverage cuts both ways. Pick one commodity, learn its contract, decide your entry, exit and position size, and check how the plan holds up across calm and volatile months before you trade it live.
AlgoTest helps you move from an idea to a strategy you can inspect and test before deciding whether to deploy.
Join us as we simplify retail trading in India.
Related Reading
FAQs
What is commodity trading in simple words?
Commodity trading means buying and selling contracts whose prices follow raw materials like gold, crude oil or copper. You profit if the price moves the way you expected and lose if it moves against you.
Is commodity trading legal in India?
Yes. Commodity derivatives trade on SEBI-regulated exchanges such as MCX, NCDEX, NSE and BSE, through SEBI-registered brokers.
How much money do I need to start commodity trading?
It depends on the contract. Futures need margin, a share of the contract value, so a smaller contract like Crude Oil Mini or Gold Mini needs much less than its full-size version. Also keep money beyond the margin to cover losses and charges.
Is commodity trading good for beginners?
It can be, but leverage makes it risky. Learn one commodity well, work out how much one lot could lose, and practise on past data before trading live.
What are the most traded commodities in India?
Gold, silver, crude oil, natural gas and copper are the most traded commodity futures on MCX.
Can I take delivery of commodities?
On MCX, gold, silver and base metal futures settle by delivery if held through expiry, though many brokers close positions before the delivery period. Crude oil and natural gas futures are settled in cash.
Is commodity trading income taxable?
Yes. Profits from commodity derivatives traded on a recognised exchange are generally treated as non-speculative business income. A tax professional can confirm how it applies to you.
What is the difference between MCX and NCDEX?
MCX trades mainly metals and energy, while NCDEX focuses on agricultural commodities.