What are the different order types available on MCX?
The Multi Commodity Exchange of India, popularly known as MCX, provides a platform to trade in a wide range of commodities including metals, bullion, energy, and agricultural commodities. Trading on the MCX platform is facilitated through various trading mechanisms such as spot trading, futures contracts, and options contracts. To effectively trade on the MCX, it is essential to understand the different types of orders available for traders.
Different Types of Orders Available on MCX:
Market Order:
A Market Order is the simplest type of order available on MCX. When an investor sends a market order, the order is executed immediately at the best available price in the market. This type of order is recommended for investors who are not too concerned about the price at which their trades are executed. It is also used when you want to buy or sell at a fixed quantity (number of units) at any available price in the market.
Limit Order:
A Limit Order is an order to buy or sell a commodity at a specific price or better. This means that the order will be executed only if the market price reaches the pre-determined limit price. A limit order is useful when investors want to execute their trades at a specific price level and are willing to wait for the market to reach that price. It is also used to ensure that the investor pays no more than their pre-determined maximum price or receives no less than their pre-determined minimum price.
Stop Loss Order:
A Stop Loss Order is an order to sell a commodity if the price falls to a specific level. It is used to limit losses and protect against adverse price movements. For example, if an investor buys gold at Rs. 50,000 per 10 grams and sets a stop loss order at Rs. 49,000 per 10 grams, the order will be executed automatically if the price falls to Rs. 49,000 per 10 grams. It is an effective tool to manage risk in volatile markets.
Stop Loss Limit Order:
A Stop Loss Limit Order is similar to a Stop Loss Order, but it includes an added component that specifies the maximum price at which the order can be executed. For example, if an investor buys gold at Rs. 50,000 per 10 grams and sets a Stop Loss Limit Order at Rs. 49,000 per 10 grams with a limit price of Rs. 48,000 per 10 grams, the order will be executed automatically if the price falls to Rs. 49,000 per 10 grams. However, the order will not be executed if the price drops further than the specified limit price of Rs. 48,000 per 10 grams.
Bracket Order:
A Bracket Order is similar to a Stop Loss Limit Order, but it includes two limit orders to define the profit and loss levels. When an investor sends a bracket order, it has three components; the entry order (market or limit), the target order (limit order), and the stop-loss order (also a limit order). It is an effective tool to limit losses and capture profits.
In conclusion, with five different types of orders to choose from, the MCX platform offers investors various options for executing trades. Depending on their investment strategy and risk appetite, investors can use a combination of these orders to manage their risk and maximize profits. Irrespective of the order type investors choose, conducting thorough research and analysis of the commodity market should be the first step before placing an order.
By Astrobulls Research Pvt Ltd