Trading in Commodity vs Stock Futures


#1

Listing down pros of each.

Commodity:

  1. Commodities have lesser volatility, so lesser margins required
  2. Commodity markets are open for longer time, so lesser risk to positional traders
  3. Commodities are based on common products in daily use, so less chances of sudden wild price swings

Stock Futures:

  1. Stock Futures are cash settled, so safer for traders
  2. Stock Futures have larger price swings, so potential for higher short term profits
  3. Larger number of available instruments when compared to Commodities

Any other points that you want to add?


#2

Commodities - especially the global ones (metals, energy, etc) are much tougher to be manipulated because of the size of those markets. When trading stock futures, potentially there could be many insiders who know more than you, and can manipulate the price (especially with mid cap stocks with lesser liquidity).


#3

I like both of these options but if i have to pick only one, then it has to be commodity trading. The reason is that the volatility is low which is always nice. I know that stock trading has the best potential but I have to go with commodity. Can someone change my mind?


#4

Another advantage of Commodity Exchanges are that they provide GTC orders. So, if you place GTC Stop Loss Orders for your positions, and the next day if your system or internet is down, or your broker’s system is down, your positions are still protected on the Exchange. Currently, NSE does not provide GTC orders.


#5

@sagar.m , could you please explain what GTC order means with respect to commodity exchanges? Does MCX/Zerodha provide that?


#6

GTC = Good Till Cancelled order. (https://en.wikipedia.org/wiki/Good_'til_cancelled)


#7

a GTC order will continue indefinitely until the specified parameters are met, whilst a normal day order would cancel automatically after the market closes, requiring the investor to make a new order the next day if desired.

So, would the following scenarios in trading commodities work on Kite as per this definition:

  1. If I place a limit long order/short order on Kite to enter into a crudeoilmini contract, and by end of the day if the limit price is not hit, the pending order will continue to stay on in Kite? And if the limit price is hit in the coming days, the order will get executed?

  2. For a long/short order executed on crudeoilmini, would kite allow me to place a target and stop-loss order that will stay in the system as pending order even after end of the day?