How stock trading and commodity trading differs?

Hi all,

I want to give a shot at crude oil day trading. So i just want to know,as far as technical analysis is concerned, are there any differences in trading stocks and commodities. As per the books,technical analysis can be applied to any asset class. i just want to reconform that statement.

Thanks in advance…:slight_smile:

Equity futures trading and commodity futures trading are very similar. The only difference being that some commodities have the option of physical delivery, whereas equity futures are all cash settled. Also like Mohan said, the timings are different.

Coming to Technical analysis, yes the rules applied are the same. The popular belief is that commodities follow technical analysis more than equity, the reason being that most of these commodities are international and there are so many more people trading on it. The more the liquidity/people trading, the higher the odds of TA working.

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Stock trading and Commodity trading differ only by exchange timings sir :-))

Thanks for the answer Nithin. If i understood your explanation correctly, as Im talking about crude oil which is cash settled, everything remains the same in commodities and stocks in the aspects of TA. Am i following you???

In stock trading, a trader purchases and sells of stocks, bonds and other securities while in the commodity market they trade in the commodities like gold, silver, suger,coffee and other agri product.

The stock market is a financial institution that allows traders to trade, meaning buy or sell goods while in the commodity market, traders deal with the shares of raw materials. Commodities can be exchanged, meaning the buyers may buy the same product from various sources and likewise the traders may sell the commodity to many buyers. In case of stock markets, shares and stocks of companies are traded.

Important strategy to become successful in day Trading -

  1. Keep pateince – To get success in day trading a trader must have strong patience. Successful day traders generally don’t trade continuously.

  2. Be a disciplined trader – It is good if the trading plan should be executed properly. A trader can make huge money if he handles his position calmly by following a manner because trading according to your own behaviour can prove bad for your investment.

  3. Trade with the amount you can afford to lose – An intelligent trader pays strong attention to the risk factor.

  4. Do not trade based on assumption, do learn from experience – do not enter into a position based on assumptions or rumours. A trader can refer stock trading tips just like stock tips, commodity tips and gold and silver tips from market leaders.

How is physical delivery settled in Commodity market? Suppose i have Crude Oil or Gold Options with me which became ITM and getting expired. What all things a commodity trader needed to be aware of and what are the risk associated with it compared to Equity FnO?

Crude oil is cash-settled contract. You don’t have to take delivery of crude oil.

Here is a doc with everything you need to know.

2 Likes

Ok, Thanks for the info.

which commodity (index form and non index) : options : can i trade on the expiry day and are cash settled ?

on another note just today i came across something like NCDEX can someone brief me about it?why does it exist :slight_smile: