Commodity futures market is like any other market in the world, where prices are determined by supply and demand. Futures are regulated by the exchange, and the clearing house guarantees the fulfillment of the contracts.
There are many theories on predicting the prices of, be it stocks, bonds, commodities, or derivatives such as options and futures. The two most common methods of prediction are by Fundamental Analysis, and Technical Analysis.
Fundamental analysis attempts to find the intrinsic value of the stock, or commodity. It looks at supply and demand, economic indicators, economic news, political situations, and such.
Technical analysis is based on the belief that all news are already reflected on the price of the stock, or commodity. One can predict future prices by studying the charts, which is based on the assumption that history repeats itself, and that prices move in trends.
Another theory in forecasting is Sentimental analysis, which is based on the assumption that investors are not rational traders but emotional, and tend to follow the herd mentality.
We are an exchange for trading in commodity futures. All our trading is done electronically online. The commodities that we currently have for trading are:
Each commodity has many different contract sizes, for example a 10GMGOL DEC5 is a contract for 10GM of gold, i.e. one lot size is equal to 10 grams of gold. The contract expires on November 30th. By then you have to close your contract. You buy a contract if you think the price is going up, and you sell a contract if you think the price is going down. You can buy any number of contracts as long as you have the initial margin to cover it.
In futures trading you only have to put a small portion of the total amount know as initial margin. For example to buy 1 contract of 10GM gold your total cost is Rs. 36,600 (on 24th Nov, 2015) but you only have to put up Rs. 1000 as your margin(Promotional Margin at DCX). Your leverage is about 1:40.
For each rupee change in the price of gold, you earn or lose a rupee ( For a 10GM Gold contract). If you buy 1 contract of 10GM Gold but the price keeps falling your contract will be liquidated when you reach the maintenance margin which is about 10% of your initial margin.
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