What exactly is a commodity?

A commodity is a physical good that can be bought and sold, usually according to an accepted specification such as quality, grade or purity. Gold, crude oil, copper and cotton are examples.

How does a retail trader access commodity markets in India?

Through a broker that offers the commodity derivatives segment. The broker connects the trading account with the exchange, while the trading platform is where the trader searches contracts, analyses prices and places orders.

What does one lot mean in commodity futures?

A lot is the standard quantity represented by one futures contract. Trading one lot means taking a position linked to that entire quantity.

If a futures contract is worth ₹5 lakh, do I need ₹5 lakh to trade it?

Not necessarily. Futures are traded using margin, so only a fraction of the contract value may be required against the position. The position itself still represents the full contract value.

Is there one correct amount of capital I should risk on every trade?

No. Traders can use different risk limits depending on their capital, strategy and tolerance for loss. What matters is deciding the maximum loss before the trade and sizing the position around that amount.

12 Chapters

Commodity Trading

A 12-chapter beginner course on commodity trading in India: what commodities are, how MCX and NCDEX work, futures and options, margin and capital, what moves prices, global-to-rupee pricing, trade analysis and risk.

12 Chapters|Last Updated on 28 September, 2026|

90 minutes read| Arpit Seth

1 Author

Behind every price on your screen is a real product that somebody, somewhere, produces, transports, stores, processes or consumes.

Gold, crude oil, copper, natural gas and agricultural commodities give traders a market that runs on different forces from equities: physical supply, inventories, weather, currencies, global demand and expiry. This course builds that understanding from the ground up across 12 chapters.

You start with what a commodity is and how Indian commodity markets came to exist, map the commodity universe and see what changes when you move from stocks to commodities. From there the course covers how trading works in India through MCX and NCDEX, how futures and options are built, how much capital a position really needs, what moves prices, how a global dollar price becomes a rupee price on an Indian exchange, and finally how a market view becomes a structured trade with risk defined before you enter.

Each chapter ends with key takeaways, FAQs and a short quiz so you can check your understanding before moving on.

Chapter 1

What Are Commodities? Meaning, Types & How They Are Traded

Start here. Learn what a commodity actually is, how the commodity universe splits into agricultural and non-agricultural markets, and why trading a commodity contract is different from buying the physical good.

A commodity is a physical good that can be bought and sold, usually against an accepted specification or grade.
Commodities can broadly be divided into agricultural and non-agricultural commodities.
Agricultural commodities include grains, oilseeds, spices and crops such as cotton, while non-agricultural commodities include precious metals, base metals and energy products.
Commodity markets are connected to the real economy. Changes in production, availability, storage or consumption can ultimately affect the market price.
Buying a physical commodity and trading a commodity derivative are different things. One involves the actual asset, while the other involves a financial contract linked to it.
Futures and options are two important commodity derivatives. Their mechanics, risks and use cases will be covered later in the course.

The Commodity Universe Buying vs Trading A Commodity Where Commodities Fit In Markets

Chapter 2

How Commodity Markets Evolved in India & Why They Exist

From hundis and the Bombay Cotton Trade Association of 1875 to MCX, NCDEX and SEBI. Trace the history of commodity trading in India and understand the problems that futures contracts and exchanges were built to solve.

Commodity trade in India goes back centuries, long before modern exchanges and financial markets.
As trade expanded, buyers and sellers needed clearer standards around quality, quantity, location, delivery and price.
Future price uncertainty created a need for contracts and mechanisms that could help producers and buyers manage price risk.
Organised commodity trading in India evolved through major milestones such as the Bombay Cotton Trade Association in 1875, post-Independence restrictions, nationwide electronic exchanges in 2003 and the shift to SEBI regulation in 2015.
Commodity markets serve both hedgers and speculators, while organised exchanges provide standardisation, price discovery, transparency, clearing and settlement.

Why Future Prices Became A Problem The Electronic Revival Who Uses Commodity Markets?

Chapter 3

The Commodity Universe: Agri vs Non-Agri Commodities Explained

Gold, crude oil, copper and turmeric sit side by side on a screen but live in very different markets. Map the commodity universe by family and learn what sits behind precious metals, energy, base metals and agri commodities.

The commodity universe can broadly be divided into agricultural and non-agricultural commodities.
Non-agricultural commodities include precious metals such as Gold and Silver, energy products such as Crude Oil and Natural Gas, and base metals such as Copper, Aluminium and Zinc.
Agricultural commodities include grains and pulses, oilseeds, spices, fibres and the Guar complex.
Different commodity families are connected to different physical markets, which means the developments that matter to them can vary considerably.
Before analysing a commodity, a trader should understand what it is, who uses it and what kind of supply chain sits behind the price.

Non-Agricultural Commodities Agricultural Commodities Why The Commodity Itself Matters

Chapter 4

Commodities vs Stocks: What Changes When You Trade Commodities?

The chart looks familiar, but the market underneath is not. See how physical supply, storage, expiry and settlement change the game, with the April 2020 negative crude oil episode as the case study.

Stocks represent ownership in a business, while commodity derivatives are linked to physical goods.
Commodities can be produced, consumed, transported and stored, so physical constraints can affect their markets.
Stocks bought in the cash segment do not have a predetermined expiry, while commodity futures and options have defined expiries.
The April 2020 WTI episode showed how storage pressure, physical delivery and expiry can affect a futures contract.
Different commodities have different physical market structures, so understanding the market behind the contract matters.

What Sits Underneath The Price?When Crude Oil Futures Went Below Zero Different Commodities Work Differently

Chapter 5

Why Trade Commodities? Opportunities, Hedging & Diversification

Do commodities deserve a place on your screen? Weigh the wider opportunity set, direct access to macro themes, longer trading hours, hedging and diversification against the extra attention and risks they demand.

Commodities give traders access to a different opportunity set, including precious metals, energy, base metals and agricultural markets.
They can provide a more direct way to trade global and macroeconomic themes such as financial conditions, energy supply or industrial demand.
Commodity derivatives are used both to take market views and to hedge existing commodity-price risk.
Commodity trading can extend beyond regular Indian equity-market hours, and traders can take bullish or bearish views through futures or options.
Commodities can broaden a trader's market exposure, but they bring different risks and do not need to be part of every trader's approach.

A Different Opportunity Set Hedging Is Another Reason Commodities May Not Suit Every Trader

Chapter 6

How Commodity Trading Works in India: Exchanges, Brokers & Timings

Meet the plumbing behind an Indian commodity trade. Learn how MCX and NCDEX, your broker and a platform like SAHI connect, what a search for Gold actually shows, when the market trades and who regulates it.

Commodity derivatives in India are traded on organised exchanges such as MCX and NCDEX.
MCX holds the primary market share in major non-agricultural contracts, while NCDEX leads in several agricultural commodity markets.
Retail traders access commodity exchanges through a broker and trading platform, rather than placing orders directly with the exchange.
Searching for a commodity can show different contract variants, futures or options and multiple expiries, rather than one permanent instrument.
Commodity derivatives are regulated by SEBI, while globally traded commodities can continue reacting to international developments beyond regular Indian equity-market hours.

Where Commodity Trading Happens In India The Commodity Trading Day Who Regulates Commodity Trading?

Chapter 7

Understanding Commodity Futures & Options: Lots, Expiry & Strikes

Decode what you are actually trading. Learn how spot and futures prices relate, how to read GOLD 05 OCT FUT, what a lot is, how settlement works, and how commodity options sit on top of futures contracts.

Futures and options provide different ways to express a commodity view, but the position, risk and payoff can differ significantly.
A futures contract represents a standardised quantity of a commodity for a specific expiry, and different expiries can trade at different prices.
Commodity futures trade in lots, and the contract's expiry and settlement method determine what happens if the position is carried further.
A commodity option has a Call or Put, strike price, premium and expiry, while ITM, ATM and OTM describe the strike relative to the underlying futures price.
Commodity options are linked to a specific futures contract, so an option carried into exercise can result in a futures position.

Commodity Futures Commodity Options Futures Or Options?

Chapter 8

How Much Capital Do You Need to Trade Commodities? Margin, Lot Size & Premium

Work through the numbers. See how lot size turns a quoted price into contract value, how margin creates leverage, how mark-to-market works, and why option buyers and option sellers need very different amounts of capital.

Lot size tells you how much of a commodity one contract represents and therefore affects the value and exposure of the position.
Contract value measures the market exposure represented by a futures contract, while margin is the capital required against that position.
Margin creates leverage, so futures P&L is based on the full contract quantity even when the capital blocked is much smaller than the contract value.
For an option buyer, premium × lot size determines the total premium outlay. An option seller receives premium but generally has to maintain margin.
The amount of capital required to take a position and the market exposure created by that position are not necessarily the same thing.

Lot Size And Contract Value Margin And Leverage Capital Required vs Exposure

Chapter 9

What Moves Commodity Prices? Supply, Demand, Inventories & Key Drivers

Look underneath the contract. Understand how supply, demand and expectations set commodity prices, why inventories change the impact of a shock, and how rates, the dollar, OPEC, weather and seasonality matter differently for gold, crude, gas, copper and agri.

Commodity prices are ultimately connected to supply, demand and expectations about how that balance may change.
Inventories act as a buffer between supply and demand, so the same disruption can have a very different impact depending on how much stock is already available.
Economic growth, interest rates, inflation and the US dollar can influence commodity markets, but their importance varies from one commodity to another.
Production disruptions, geopolitics, OPEC decisions, weather and seasonality can change the supply-demand picture.
Different commodities have different dominant drivers, so a development needs to be understood in the context of the specific market it affects.

Supply, Demand And Expectations Inventories: How Much Cushion?Different Commodities, Different Drivers

Chapter 10

From Global Price to Indian Price: How USD/INR Shapes MCX Commodity Prices

International gold is quoted in dollars per troy ounce, yet you trade a rupee contract on MCX. Learn how global benchmarks, USD/INR, contract structure and trading hours combine to produce the price on your screen.

Many commodities traded in India are connected to international benchmark prices.
Because major global commodities are commonly quoted in US dollars, USD/INR becomes an additional price driver for an Indian trader.
A weaker rupee can amplify a rise in the international commodity price, while a stronger rupee can partly offset it.
Indian commodity prices do not have to move exactly like international benchmarks because currency, contract specifications, domestic costs and local conditions can also matter.
Differences in trading hours mean some global moves may already be reflected while Indian commodity markets are open, while others may be absorbed when domestic trading resumes.

The Currency Layer From International Gold To A Rupee Price Trading Hours Matter Too

Chapter 11

How Do You Analyse a Commodity Trade? From Market View to Trade Plan

'Crude Oil could rise' is an opinion, not a trade. Follow a worked Crude Oil example from catalyst to trend, support and resistance, then to a defined entry, target and invalidation before choosing futures or options.

A market opinion is not yet a trade. A trade needs a reason, structure and a point where the idea no longer holds.
Fundamental drivers explain why a commodity may move, while price behaviour helps show whether the market is supporting that view.
Trend, support and resistance, candlesticks, timeframe, volume and basic indicators can all add useful information.
A trade begins to take shape when you can define an entry, target and invalidation.
Analysing the commodity and choosing whether to express the view through Futures or Options are separate decisions.

What Is Price Telling You?Entry, Target And Invalidation From Opinion To Trade

Chapter 12

Risk & Behaviour Before You Trade Commodities: Position Sizing, Stops & Discipline

A well-analysed trade can still be badly managed. Turn invalidation into position size and a stop-loss, understand gap, liquidity and expiry risk, compare futures and options risk paths, and spot the behaviours that wreck good plans.

Position sizing connects the amount you are prepared to lose with the stop-loss distance and the quantity represented by the contract.
A stop-loss turns the invalidation level from your trade analysis into an actual exit instruction, while risk/reward compares the planned loss with the potential gain.
Volatility, gaps, liquidity, global events and expiry can make the actual outcome different from the neat risk calculation made before entry.
Futures and Options carry different risks. Futures can create large exposure through leverage, while option buyers and sellers face different premium, expiry and payoff risks.
Oversizing, FOMO, blind averaging, moving stops and revenge trading can undo a good trade plan, while choosing not to trade can itself be a valid risk decision.

From Invalidation To Position Size Planned Risk vs Actual Risk Before Every Commodity Trade, Ask

FAQ