Entering in the commodity trading world can be very difficult for the beginners. So to start with commodity trade, the trader has to understand how to open MCX Account?
MCX offers a wide range of trading commodities like Gold, Silver, Zinc, Lead, etc to trade and earn a good profit.
Opening an account in MCX allows you to trade in one of the best commodity exchanges in India and also in one of the largest commodity exchanges in the world.
In this article, we will give you a complete overview of how to open the MCX account and get into the trade-in different commodities.
MCX Demat Account
MCX or Multi-Commodity Exchange has its headquarter in Mumbai that started trade in the year 2003 after which the people started getting into commodity trade to do long-term investment.
However, when it comes to commodity trade it is disparate from equity trade or other trading segments.
You can open the MCX account online by getting across its registered members who are offering the commodity trading option.
As per the latest data of 31st March 2020, the total number of members registered and authorized persons under the stock exchange is 692 and 54,900 respectively.
Once you open the MCX account you would be able to do cash settlement or physical settlement of trades in commodities.
Although, trading in Commodities has its own risk and challenges. It offers a good platform for commodity traders to earn profit through commodity trading.
So, if you want to invest in different commodities in the stock market, then the MCX Demat Account or trading account opens the gateway.
Grab the complete information and be an efficient trader in the share market.
MCX Demat Account was regulated by FMC i.e. Forward Market Commission till 2015 after that FMC merged with SEBI.
Open MCX Trading Account
As a trader, you must be well aware of the world economy, commodities news, and political news, etc which affect the price and trading of commodities.
This is not just for commodities trading, but it applies to equity trading as well.
Not only this, but a commodity market trader must have an idea of technical analysis and fundamental analysis as well so that they can easily catch the movement of the commodity market. Apart from the above suggestions, if you looking ahead to open the MCX account, then it is important to keep some margin money in your account.
These margins are a type of security for the broker in case you suffer from a huge loss and not able to compensate that.
Here are the types of margin:
Initial Margin: The initial margin is the minimum margin money that a trader is required to deposit in her/his MCX open Account to start trading.
M2M or mark-to-market Margin: The full form of M2M margin marks to the market margin. Profit/loss of a trading day is adjusted each day by the M2M margin.
If you earn a profit after the end of the trading day, the money will be transferred to your MCX Account by the clearinghouse. And if you lose, the money will be transferred from your MCX Account to the clearinghouse account by the broker.
Special margin: This type of margin is collected by the traders to set off excessive speculation and to control volatility.
Above all is the necessary information which you should know before stepping into commodity trading.
Generally, the margin amount demanded by the firm is between 5%-10% of the total contract value of a commodity.
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Why Open MCX Trading Account?
There are various reasons which will force you to open MCX account to trade in a commodity market. Some of them are as follows:
MCX uses and applies technology so efficiently that it enables it to increase its business and attract more and more investors towards it.
Thecontinuous increase of MCX business is also through its effective research and product development, innovation, and intelligent use of IT.
Multicommodity Exchange (MCX) is certified with three ISO standards that are ISO 9001:2015 (Quality management system), ISO 14001:2015 (Environment management standards), 27001:2015 (Information security system standard).
Except for MCX, there are other exchanges like NCDEX also which are available to trade in India. But, most of the commodity market traders choose to trade in MCX.
The above descriptions give us some more details about the multi-commodity Exchange (MCX). Now, we will move forward to the main part of our article i.e the steps required to follow to trade in MCX.
How to Open MCX Trading Account?
To open the MCX account, or the account with any other stock exchange like NSE, BSE, NCDEX, the foremost step is to search for the stockbroker that offers you the platform to trade in the particular segment.
Next comes the account type. In general, almost every broker offers the 3-in-1 or 2-in-1 account thus offering you the trading and demat account in one fold.
The selection of the right stockbroker is the very first step. After this, you will have to start the MCX account opening process so that you can start trading.
For this, either you can apply offline by downloading the form and sending it to the stock broker’s address or you can fill the form online by visiting the broker’s website.
Online application form: Fill the online application form available on the website of the broker. All you need to fill the required area with your details demanded in the form. You will have to provide address proof and identity proof as well to complete the application fill-up process.
Upload Documents: Upload the important documents for Demat account like PAN card, Aadhaar Card, Bank Passbook, recent passport size photograph, etc.
Verification: After form fill-up, you will have to wait for the verification process that will be completed by the broking firm. If your filled details will be correct and verified from the broker, you will get a confirmation on your contact number or an email.
Margin money: After all, you will have to deposit the margin money in your MCX demat account to start trading.
As we discussed above, margin money is just like security money so without this no broking firm will allow you to trade.
By going through the above steps, you can easily open the MCX account.
MCX Account Opening Charges
The most important step to open the MCX account is to look ahead to the charges. In general, you have to pay the account opening charges and the AMC charges, charged by the broker annually.
Although most of the stockbroker offers the Demat Account for Free, i.e. you don’t have to pay any charges for opening the Demat Account. But still, it is good to know and ensure that there are no hidden charges.
Apart from this, there are DP charges, that most of the investors are unaware of. These charges are to be paid to the Depositories like CDSL or NSDL whenever share is being sold from your demat account.
MCX Account Advantages
The main motive behind investing in any product is to earn a profit. Once you open the MCX account, you would be able to reap the following benefits:
Importer/exporter uses hedging to minimize the losses that can occur due to the fluctuations in the commodity market. By making an opposing position in the commodity futures market, one can hedge the exposure to the physical market.
Many factors bring the price down of a commodity. If you are a producer and want to fix the price of your commodity, you can take part in commodity trading and fix the price of your product.
MCX Demat Account allows investors to invest in different commodities thus brings better diversification in your investment portfolio.
MCX Account Disadvantages
Opening the commodity trading account with MCX is also associated with some drawbacks like:
Trading in commodity involves risks. Trading in commodities is associated with around 4 times more risk than equity or other trade.
Opening the MCX account opens a gateway for the commodity trade. But when it comes to the generation of profit or return, commodity trading does not offer a good income over time.
MCX’s open account is one of the best methods to make investment and earn a huge profit in the commodity market.
But for this, you need to do a lot of hard work, understanding of the market in detail, research and analysis capability, and the most risk-bearing appetite.
Overall, Commodity trading allows you to make an investment and earn a lot by preparing yourself.