Commodity Futures trading process

[sifar007]

Hi Friends,

I am a beginner in commodity futures trading arena and need guidance in understanding the basics. here are a few queries?

Reatime Data - Are all real time data providers provide same data? i like using the MT 4/5 platform and I find that the data on my terminal does not match actual data. For instance the closing data for one metal on MT5 was 700.00 and on the MCX site it was 700.80. i have noticed a significant gap in the gold prices also. Q: Why is such difference? is there someone who can provide more accurate data?

Trading Dynamics: I understand that in the futures market, we find a trend on the spot prices and buy future contracts.

Here is a data which i want to discuss:

MCX Spot Prices as on 16 Jun 2012 13:26>> ALMOND DEL : 409.50
MCX Future Prices as on 16 Jun 2012 14:00>> ALMOND DEL (JUN 2012) : 414.50

So, Let say i foresee a rise in price and buy a June contract at 414.50 when the spot price is at 409.50.

So, i start my trade with a loss of 5. Is my interpretation correct?
is this typical for all future trades? i.e to start with a loss?

Also, how does the who trade process work? Here is my understanding. Please point out the lapses

Buy a contract at 414.50 and pay margin on 414.5. Q: what will be my a/c balance at the end of the day if the price remains at 409.50? how is the initial loss reflected in my account?

thank you in advance for your responses.

 

[praveen taneja]

Bro dont know lot size of almond but tell u imagining its 1000 ok.

at end of dat at 11.55 broker would show in his account that ur position clear and next day at morning he would buy at closing rate and due to loss of 4500 ur portfoilio is down by 4500 and this would continue till u clear ur position or say when ur cash balance is less then required.
another thing to note is in ncdex delivery clearance date is 15 days before expiry so lets say expiry is on 20th so u have to make sure either till 5th u clear position or confirm that u r going to take delivery of that lot

 

[Newbie Day-Trader]

When you buy a futures-contract, you make profits/losses based on the price movement of the FUTURES-CONTRACT, NOT based on the spot-price.
So if you have bought a contract at 414.50 then if price of the FUTURES-CONTRACT (not spot) goes below that then you start losing money & if it moves above it then you make profits.

So far as the difference between spot & futures price is concerned, that's caused by the cost of financing & storage costs. So futures generally do trade above the spot price & as the expiry date of the contract comes closer, the difference usually starts shrinking until the two prices "merge".
More on this here - http://en.wikipedia.org/wiki/Contango

 

[chintan786]

can anyone tell me where to trade cotton futures. I mean NCDEX or MCX. there is almost no volatility on MCX. can someone tell me about NCDEX.
is this true NCDEX require 100% margin for cotton futures.

regards,

chintan

 

[sifar007]

I want to typically use the trend following approach where i simply ride along the direction and make what i can. However, if Futures has a contango situation, i will first need to offset my loss and then look for a healthy return to justify the risk. In other words, I need to predict the direction of the price movement significantly. Is this correct?

Also, i was under the impression that the entry, exit and stop loss positions on a Future contract are taken based on the spot prices. is this true?

How are the future price movements related to actual spot rates in realtime? is there actually any predictable relationship?

 

[praveen taneja]

can anyone tell me where to trade cotton futures. I mean NCDEX or MCX. there is almost no volatility on MCX. can someone tell me about NCDEX.
is this true NCDEX require 100% margin for cotton futures.

regards,

chintan

it varies on commodity to commodity be sure if u trapped and IF you have to take delivery your home must have space to put 5-700kg cotton:lol:

 

[rgrforex]

So does this mean thats , if the Futures price is more compared to spot price , is it more lkely to come down nearing to the Spot price

OR

The spot price will increase towards the Future price when the expiry is approaching ??

Plz clear this ...