The top commodities that we would be interested to trade in belong to 2 distinct classes, Metals and Energy. These distinct classes ususally have different price action, for example zinc and crude. So trading 2 mini lots of zinc and crude, for example, allows us to spread the risk more efficiently for the same amount of capital required for trading a single lot of Nifty.
The commodities that provide good trading results with our System within these 2 classes are
Zinc, Aluminium, Copper and Silver under Metals and
Crude, Natural Gas under Energy
All commodities mentioned above have mini lots in MCX except for Copper, which makes it possible to trade them for a relatively smaller amount of capital.
Margin Requirements for Trading Chosen Commodities on MCX - Please refer to the table below for the Margin requirement on MCX for trading in our preferred basket of commodities, as on date. The Margin amount is based on the Average Price, an average of the High and Low prices for the past 12 months from Apr'23 to Mar'24. The actual Margin required would be based on the Current Market Price and approximates closely to the amount considered below.
Commodity | Average Price (INR) | Margin per Lot (INR) |
Copper | 744 | 1,80,000 |
Zinc Mini | 235 | 25,000 |
Aluminium Mini | 205 | 25,000 |
Silver Mini | 72100 | 50,000 |
Crude Mini | 6700 | 25,000 |
Nat Gas Mini | 216 | 10,000 |
The margin required for trading 1 mini lot of Zinc or Crude comes to approx INR 25K. So the margin requirement for trading 2 mini lots each of Zinc and Crude would come to around INR 1 lac (1,00,000). The capital requirement would be approx INR 2 lacs at 50% exposure, adhering to prudent exposure norms.
So for a trading capital of INR 2 lacs, you can spread your risk across 2 lots each of 2 different commodities belonging to 2 different classes. That compares very favourably to Nifty where you need more than this amount to take exposure in just a couple of lots of Nifty.
Please click on "Next Post" to move to Backtesting Results to know about indicative results from backtesting these commodities over the past 2 years.
Do we need to invest in two lots of zinc and 2 lots of crude ? Why not one lot of each ?