GOLDEN TRADING RULES OF MCX TRADING

• DO NOT OVER TRADE
• NEVER FORGET TO PUT STOP LOSS.
• ALWAYS MODIFY STOP LOSS ON EVERY PRICE RISE.
• NEVER TRY TO RECOVER LOSSES ON THE SAME DAY
• ALWAYS BOOK PROFIT ON FIRST OPPORTUNITY.
• AVOID TRADING IN VOLATILE MARKET.
• MONEY CAN NOT BE MADE EVERYDAY FROM MARKETS.
• NEVER AVERAGE YOUR POSITIONS WHEN MARKETS ARE NOT FAVOURABLE.
• DO NOT EXECUTE SO MANY TRADES AT ONE TIME.
• ALWAYS FOLLOW THE INSTRUCTIONS.

MCX-SX tweaks transaction charges for currency futures trade

Faced with falling volumes and growing competition from rival BSE, MCX Stock Exchange has tweaked its transaction charges for futures contracts traded on its currency derivatives platform.

While there would be no change in a flat fee of Rs 1.05 per lakh of turnover in currency futures trade on both sides of transaction in contracts based on dollar-rupee currency pair, the exchange has decided to exempt 'passive side of transaction' from this charge in case of other currency pairs of rupee with euro, British pound and Japanese yen.

Accordingly, only 'active' side of transactions in non-dollar currency pairs now attract a transaction charge of Rs 1.05 per lakh of turnover. The revised charges have come into effect from November 5, 2014, as per a circular from MCX Stock Exchange (MCX-SX).

Earlier, a flat charge was applicable across all currency pairs.

"It has been decided to revise transaction charges of currency futures contracts traded in currency derivatives segment of the exchange to enhance liquidity and make the segment more attractive to participants in the market," MCX-SX said in its circular. The revision in charges by MCX-SX comes weeks ahead of rival BSE beginning to levy a fee for trading on its currency derivatives platform with effect from December 1. BSE has so exempted currency derivatives from any transaction charges.

BSE's market share has been rising consistently in the currency derivatives market over the recent months on the back of implementation of latest technology solutions, lower costs and faster trades. As per capital markets regulator Sebi's latest monthly bulletin, the turnover of currency derivatives at BSE increased by 22.6 per cent to Rs 1,41,170 crore in September this year from Rs 1,15,127 crore in the previous month.

This assumes significance as BSE began currency derivatives trade in November 2013 itself and it has overtaken MCX-SX as the second largest exchange in this segment with a market share of about 30 per cent currently.

According to Sebi, monthly turnover of currency derivatives at NSE increased by 9 per cent to Rs 2,85,236 crore in September, from Rs 2,61,636 crore in August 2014, while that of MCX-SX fell by 8.6 per cent to Rs 57,590 crore in the same month. The turnover at the fourth exchange USE in this segment also rose by 14.2 per cent to Rs 9,370 crore in September, over the previous month, making MCX-SX the only exchange to witness a decline.

While the turnover at BSE has almost doubled from Rs 72,000 crore in April this year, in case of MCX-SX it has marginally fallen from Rs 59,000 crore in the first month of 2014-15. In case of the largest bourse NSE also, the turnover has risen considerably from Rs 1,55,000 crore in April 2014.

How Does Commodities Trading Affect the US Economy?

Commodities trading affects the economy every day. It can be helpful to you because it makes public the analysts' forecasts of future prices of the most important market goods. These traders can spend all day studying future scenarios. If you suddenly see corn prices rising, you know they expect increased demand, perhaps from new regulations regarding ethanol, or decreased supply, such as from a drought.

 

Traders Create Oil Price Bubbles

One of the most important commodities is oil. The price of oil changes daily, which has an impact on every good and service produced in America. As traders take into account all information regarding oil supply and demand, as well as geopolitical considerations, this affects oil prices. It is these assumptions behind oil prices that affect the economy so significantly. For more, see Why Are Oil Prices So High?

 

Thanks to commodities traders, oil prices can be affected by more than just the laws of supply and demand. For example, in 2008 oil prices skyrocketed. The was despite the fact that global demand was down and global supply was up. The Energy Information Administration reported that oil consumption decreased from 86.66 million barrels per day (bpd) in the fourth quarter of 2007 to 85.73 million bpd as of in the second quarter 2008. During this same time period, supply rose 85.49 milion bpd to 86.17 million bpd. According to the laws of supply and demand, prices should have decreased. Instead, by May prices rose almost 25%, from $87.79 to $110.21 per barrel of oil. 

The EIA reported that the "flow of investment money into commodities markets" caused the trend. Money that traders had invested in real estate or stocks was diverted into oil futures. Later that year, frenzied commodities traders drove the price up to its all-time high of $145 a barrel.

 

How Traders Caused Food Riots

Commodities traders were also responsible for high food prices that created riots in less-developed countries.First, funds were also directly diverted into wheat, corn and other commodities. Second, high oil prices leads to higher distribution costs for food. For more, see What Is the Real Reason for High Oil Prices? (Source: BBC News, Commodity Boom Continues to Roll , January 16, 2008; CNN, Riots, Instability Spread as Food Prices Skyrocket , February 18, 2008)

 

Thank Commodities Traders for High Gas Prices

In January 2013, traders bid up oil prices early in the year. They were concerend about a potential threat on of the world's most strategic oil shipping lane. Iran created the fear by playing war games near the Straits of Hormuz. By February 8, oil prices had risen to $118.90/barrel, sending gas prices to $3.85 by February 25. This was earlier than in 2012, when Iran actually threatened to close the Straits. Traders didn't bid up oil prices until March, sending gas prices higher in April. 

In 2011, oil prices didn't start rising until May, sending gas prices up immediately. This was a result of traders anticipating higher oil and gas prices due to higher demand from the summer driving season.

What Are Commodities Futures?

Commodities futures are an agreement to buy or sell a commodity at a specific date in the future at a specific price. Just like the price of bananas at the grocery store, the prices of commodities change on a weekly or even daily basis. If the price goes up, the buyer of the futures contract makes money, because he gets the product at the lower, agreed-upon price and can now sell it at the today's higher market price. If the price goes down, the futures seller makes money, because he can buy the commodity at the todays' lower market price, and sell it to the futures buyer at the higher, agreed-upon price.

Of course, if commodities traders had to actually deliver the product, very few people would do it. Instead, they can fulfill the contract by delivering proof that the product is at the warehouse, by paying the cash difference, or by providing another contract at the market price.

 

How Commodities Futures Affect the Economy

Commodities futures do a great job of accurately assessing the price of each commodity because since they are traded on an open market. Since they are futures contracts, they also forecast the value of the commodity into the future. The values are set by commodities traders and analysts, who spend all day every day researching their particular commodity. Of course, their forecasts are based on today's information, so if North Korea suddenly tests a nuclear weapon, the commodities prices will change dramatically.

Most of the time, prices are an accurate reflection of market conditions. However, like any other traded item like stocks or bonds, commodities futures can reflect the emotion of the trader or the market as much as underlying fundamentals. Often speculators will bid up the price of a commodity to make a profit, especially if a crisis occurs and they anticipate a shortage. When other traders see that the price of a commodity is skyrocketing, they can create a bidding war and drive the price even higher. The basics, like supply and demand, haven't changed. Then, when the crisis is over, the prices can plummet.

This happens most often to two popularly-traded commodities, oil and gold. In January 2013, oil futures prices started rising when Iran started playing war games near the Straits of Hormuz. Traders were worried that a potential closure of the Straits would limit oil supplies. For more, see What Makes Oil Prices So High?

In 2011, gold hit an all-time high of $1,895. Demand and supply hadn't really changed, but traders bid up gold prices in response to fears of ongoing economic uncertainty. Gold is often bought in times of trouble because many people see it as a safe haven. For more, see Gold Prices and the U.S. Economy.

Other energy products include natural gas, heating oil and RBOB gasoline. Contracts are also written on other metals, such as copper, as well as other precious metals, such as silver and platinum. Commodities contracts are also written in many agricultural products, such as corn, wheat, and soybeans; so-called "soft" commodities, such as cotton, coffee and sugar, and livestock, such as live cattle and lean hogs. 

Another important commodities category is Financials, which trade currencies such as the 3-month Eurodollar and the euro-FX interest rates on the 10-year Treasury note; and stock indices, such as the S&P 500. For more, see the Commodities Futures Trading Commission.

 

How to Invest in Commodities

The best way to either invest in or monitor commodities futures is through a commodities ETF or commodities mutual fund . These can give you a single number that takes into account the broad spectrum of commodities futures that are occurring at any given time, such as the GSCI. That's because actually trading in commodity futures and options contracts is very complex and risky. Commodities prices are very volatile , and the market is rife with fraudulent activities. If you aren't completely sure of what you are doing, you can not only lose all your money (like stocks) but you might also owe more even more to fulfill the contract. However, you want to invest in commodities anyway, please see About.com Guides to Commodities Profiles and Day Trading in Commodities Futures . Also, review the CTFC's Guide to Fraudulent Activity and its Education Center.