ICICI Direct (part of ICICI Securities) is the largest retail broker in India, with over 170 branches in the country, not to mention offices in London and New York. If you’ve been thinking about opening a commodity account but don’t know how to do that, you’ve landed in the right place. This article will throw some light on what commodity trading is and how you can benefit from it on ICICI Direct.
What is сommodity trading online?
Before getting deep into trading, let’s be clear about what applies to commodities in this context. ICICI Direct offers four categories, i.e., energy (gas, oil), metals (iron, copper, steel, brass), precious metals (silver, palladium, platinum), and agricultural stuff (soybean oil, sugar, soybean, cotton, maize).
Note! Other platforms may offer alternative categories. For instance, on Maitra Commodities, you can trade in commodities such as meat and livestock (complete list at www.maitracommodities.com/commodity).
Commodity trading online is about exchanging different assets, which are contracts based on the price of a physical commodity. These contracts include futures, options, and similar financial derivatives.
A futures contract in commodity is a binding agreement between two parties to trade a specified quantity of a commodity at a specified price on a specified date in the future, referred to as the “settlement day”. An Options contract makes it possible to trade a certain amount of commodities without any obligations to the buyer of this contract.
If during the contract life, the price moves in your favor (rises in case you have a buy position or falls in case you have a sell position), you get additional income.
Commodity trading has many advantages:
- Commodity derivatives such as gold are a proven means of portfolio diversification and inflation hedge.
- The commodity market is internationally linked, which expands your investment opportunities.
- Trading hours are longer (from 9.00 AM to 11:30 PM or 11.55 PM).
- Margin requirements are minimum (margin is the amount that must be in the account for you to trade on the market).
- Commodities are simple to understand.
However, even though the process is quite simple, you should come prepared for it. Before you involve your funds in trading, choose a reliable broker that is registered with The Securities and Exchange Board of India (SEBI) and is a member of recognized commodity exchange in India (like ICICI Securities).
Is it possible to trade commodities in ICICI Direct?
With ICICI Direct, you can trade in Commodity Derivatives at Multi Commodity Exchange (MCX). It is India’s largest exchange that was founded in 2003 by the government and owned by the Ministry of Finance. According to data from the Futures Industry Association (FIA), MCX is one of the world’s leading commodity exchanges in terms of the number of futures contracts traded.
ICICI Direct is suitable for experienced investors and those who have never been involved in trading. The commodity broker provides free market news to help you understand the features of each category of commodities. There are also research advisory services; you will find many videos, podcasts, and regular reports on the platform. Articles such as “Five commodities to trade in 2022” can help develop a well-thought-out financial plan.
How to open a commodity account in ICICI Direct
You can start trading commodities by creating a trading account and linking it to an ICICI bank account that is more than six months old. The second way to start trading in commodity derivatives is to open a new 2-in-1 or 3-in-1 account. The process is quite simple:
- Go to www.icicidirect.com and click on “Open Account” in the top-right corner.
- Enter the current mobile number and confirm it with the OTP received in SMS.
- Complete the KYC process by verifying your identity. You need to provide several documents such as ID, proof of address, income, and bank account.
- Carefully read and understand the Risk Disclosure Document (RDD).
- Check the allotment of Unique Client Code (UCC) by the Commodity Exchange.
- Make a deposit in the amount of the required Margin in the product segment.
- Place order in Commodity Options or Futures.
Note! Opening a Demat account may be free, however, there are annual maintenance charges (AMC) that range between ₹300 and ₹900 and have to be paid in advance.
There is a number of benefits you’ll get while commodity trading with ICICI Direct. The modern online platform provides a fast account opening and transfer of funds, as well as access to various commodities of four types.
However, remember that trading in commodities requires a deep analysis of the market, a competent portfolio, and risk management skills. There is a potential risk of partial or complete loss of investment. ICICI Direct is not responsible for any loss arising from your actions.