How to Read an MCX Commodity Chart: Key Differences From StocksCharts

If you have ever moved from an Stocks screen to an MCX terminal, you know the unease. The candles look familiar, but something feels off. A gap you're used to reading on a stock chart doesn't behave the same way in gold or crude oil. That's because MCX trading runs on a different rhythm than Stocks trading, and misreading the chart can cost you real money on a leveraged position.

The blog discusses the creation of an MCX commodity chart, the differences between an MCX trading chart and an Stocks chart, and the mistakes made by traders who transfer their Stocks approach to the commodity trading world.

Key Takeaways

• Charts on MCX have futures contracts with predetermined expiry dates and do not involve stocks. Therefore, the behavior of prices in case of expiry will be different in charts for MCX.
• The timings of trade on MCX go well beyond the timings of Stocksmarkets. Therefore, gaps and volume on the charts will behave differently.
• The lot size and the quotation in the form of gms/kg/barrel are important for the commodity market chart but are not required in the Stockschart because the price in the Stocks market chart is based on shares.
• International factors such as the dollar index, crude oil prices, weather, and geopolitics have more impact on the charts of the commodity market than domestic Stockscharts.
• The software provided by mastertrust helps in analyzing both mcx chart and Stockschart simultaneously.

What Is an MCX Commodity Chart?

The MCX commodity chart is drawn based on the value of a futures contract that is traded on the Multi Commodity Exchange, which includes contracts on gold, silver, crude oil, natural gas, copper, or agricultural commodities. Similar to a Stocks chart, the futures contract chart makes use of candlestick patterns, volume bars, and technical indicators. However, the contract is not a stock but a futures contract.

This changes everything about how you perceive the graph. The stocks can be held indefinitely, whereas futures contracts have expiration periods. Every graph listed at MCX comes with a timer, and this timer affects the pricing mechanism in ways which the stock investor would not even imagine.

Key Differences From StocksCharts

1. Expiry Changes the Shape of the Chart

Charts for stock follow an unbroken timeline because stocks have no expiry date. But MCX contracts do. With expiry getting closer, the current month's contract experiences low volumes and higher spreads, while the next month’s contract witnesses an increase in volume. Studying the chart of one contract alone gives a wrong impression of sentiment change in the commodity market.

2. Trading Hours Are Longer and Split

The Stocksgap chart corresponds to only one particular session of the NSE/BSE stock exchange. The time range for MCX trade charts is much greater since they open before morning and close later in the evening, according to the worldwide schedule for oil and metals. 

The gap appearing on MCX chart is related to the overnight movement in the international commodity market and not to anything that occurred locally in India.

3. Price Quotation Units Differ

A Stock chart quotes price per share. An MCX chart quotes price per unit specific to that commodity per 10 grams for gold, per kilogram for silver or copper, per barrel for crude oil. Before reading a pattern as bullish or bearish in MCX trading, check the unit and lot size. Two contracts that look similar on a candlestick chart can carry very different exposure once converted to lot value.

4. External Drivers Show Up Differently

Actions taken in stock charts are influenced by factors like earnings, industry knowledge, and sentiments in the market. Actions taken in commodity charts are influenced by a larger number of factors like the dollar index, the amount of crude oil in stock, the monsoon forecast for agriculture-related commodities, and gold buying by central banks.

An investor familiar with the activities of a stock chart is likely to seek out some company-specific news that caused the sudden move without understanding that the actual cause was far off into the distance.

5. Volume Interpretation Needs Adjustment

In stock charting, an increase in volume usually correlates with news, performance, or blocks. In MCX trading, volume is influenced by rollover of contracts, deliveries as the expiration time draws near, and the relationship between global market sessions’ time zones. An increase in volume at the expiration time does not necessarily mean any interest in a new direction.

6. Volatility Bands Behave Differently

For example, crude oil and natural gas can experience greater one-session volatility compared to the majority of stocks, based on news of supply and storage. When using the assumptions of volatility from stock charts to commodity charts, your stop-loss and position sizing may be too small or too large for the actual instrument being traded.

Common Mistakes Traders Make Reading MCX Charts

• Considering the MCX chart to be the same as that of the stock chart despite not considering the expiry of the contract.
• Comparison of price levels without normalizing the lot size.
• Considering the reason behind a gap to be a local event when it could be a global one during night time.
• Taking into account the same analysis of the near month and far month contracts as far as their chart is concerned.
• Stop-loss calculations like the one done in the Stocks market.

How mastertrust Helps

In mastertrust, traders are provided with a platform where they can analyze the trading charts in the Mcx market along with their Stockstrades, instead of having to use two different applications for analyzing the market. Contract specification, lot size, expiration date, and quotation unit appear on the chart.

As far as cost is concerned, mastertrust makes it very clear that the company charges Rs. 20/- per trade for stocks, F&O, and commodity trading. So, irrespective of the type of trading chart that you choose whether it is Stocks trading or MCX trading, the pricing remains the same for both. Also, mastertrust offers no cost for account opening, wherein the demat AMC is free for the first year.

You can open a demat account with mastertrust to track both segments from one dashboard, and review the 

Visit the commodity trading section of mastertrust to review the contract details prior to your first purchase.

Final Thoughts

An MCX commodities chart is not a Stocks chart using a different name. The expiry date, quotation unit, extended hours, and factors affecting prices internationally have all contributed to altering the manner in which one would interpret the price movements in the MCX. When one stops using the same approach as in equities for commodities, one starts to understand price movements.

Frequently Asked Questions (FAQs)

1. Is MCX trading the same as Stockstrading in terms of chart reading?

No. They both utilize candles and technical indicators, but charts used for trading on MCX are expiry-based, quoted in specific quantities of the commodity, and influenced by external cues, which rarely influence the Stocks charts.

2. Why do MCX charts show gaps that Stockscharts don't?

Commodity trading hours exceed Stockshours and coincide with some degree of global hours, thus causing gaps in case of changes in gold or crude during night trading when the Indian session begins.

3. Does expiry affect how I should read an MCX chart?

Yes. As the contract is coming to an end, volume can become light and spreads can be wide, but the next month’s chart can reflect new activity. Looking at the near month’s chart alone can give you the wrong impression

4. What should I check before comparing two commodity charts?

Check lot size and quotation unit for each commodity. A very similar looking candlestick formation can mean something totally different when converted into contract size..

5. Can I track MCX trading and Stockstrading on the same platform?

Sure. mastertrust allows you to check charts of MCX and equities from the same account along with contract specifications such as lot and expiry.

6. Are commodity trading charges different from Stockscharges?

No. mastertrust charges Rs. 20/- per order across stocks, F&O, and commodity segments, so the cost structure stays consistent regardless of which chart you're trading from.