A Step-by-Step Guide for Investors and Traders

Commodity trading in Pakistan has grown significantly over the past decade with the rise of the Pakistan Mercantile Exchange (PMEX) — the country’s first and only regulated commodity futures exchange. It offers a transparent, technology-driven platform where investors can trade in gold, silver, crude oil, agricultural products, and other commodities in both micro and standard lots.

Whether you’re a retail investor seeking portfolio diversification or a business hedging against price volatility, understanding how to trade commodities in Pakistan is essential. This chapter provides a practical, step-by-step approach tailored for both new and experienced market participants.

1. Understand What Commodity Trading Means

Commodity trading involves buying and selling standardized contracts for raw materials or natural resources. In Pakistan, these contracts are futures-based, meaning the transaction is for a future date but traded today. You don’t necessarily take physical delivery — most contracts are cash-settled.

Example: You can trade a gold futures contract on PMEX and make a profit based on price movements without ever holding physical gold.

2. Choose a Registered Broker

To start trading, you need to open a trading account through a PMEX-registered broker. Licensed brokers such as Azee Securities provide the infrastructure, platforms, and regulatory support needed to access the commodity market.

What to look for in a broker:

• PMEX registration and SECP compliance
• Competitive commission structures
• Access to platforms like MetaTrader 5 (MT5)
• Research, training, and risk advisory services
• Good customer service and digital onboarding

3. Open a Trading Account

The account opening process typically includes:

• Filling out the client registration form
• Submitting CNIC/SNIC copies
• Providing proof of income
• Completing KYC requirements
• Setting up a margin account

Once approved, you'll receive login credentials for MT5.

4. Fund Your Account

Commodity trading works on a margin-based system. This means you only need to deposit a percentage of the contract value as a security margin.

Example: For a PKR 500,000 gold contract with 10% margin, only PKR 50,000 is required upfront.

Funding options include:

• Bank transfer
• Cheque deposit
• Online payment gateways (broker-dependent)

5. Understand Contract Specifications

Before entering any trade, review the commodity contract details, including:

• Lot size (e.g., 1 tola, 10 grams, 100 barrels)
• Contract value and tick size
• Margin requirement
• Trading hours
• Expiry date orsettlement method

PMEX offers micro, mini, and standard contracts to cater to various investor needs.

6. Use the Trading Platform (MT5)

Once funded, you can begin trading through MetaTrader 5 (MT5), PMEX’s official trading platform.

Features include:

• Real-time commodity pricing
• Advanced technical charting tools
• One-click order placement
• Stop-loss and take-profit functions
• Margin reports and order history

7. Develop a Trading Strategy

Successful traders follow clear strategies:

• Technical analysis: Charts, RSI, MACD, candlesticks
• Fundamental analysis: Global news, demand/supply, macro events
• Risk management: Never risk more than 1-2% per trade
• Diversification: Spread across multiple commodities
• Discipline: Avoid emotional decisions; follow your plan

Example: Buy mini gold futures on expectations of rising prices; set a stop-loss 2% below entry.

8. Monitor, Adjust, and Exit Trades

After placing your trade, actively monitor:

• Price movements
• Margin requirements (top-up if needed)
• News updates impacting your position
• Exit strategies: either via profit booking or loss control

Contracts can be closed any time before expiry, or allowed to settle based on PMEX’s settlement procedures.

9. Taxation and Compliance

Profits from commodity trading are subject to Capital Gains Tax (CGT) under Pakistan’s Income Tax Ordinance. PMEX and brokers usually deduct these automatically.

Additionally, the SECP and SBP enforce Anti-Money Laundering (AML) policies and ensure all trades go through documented, traceable channels.

10. Start Small, Learn Constantly

If you're a beginner:

• Start with micro contracts
• Practice on demo accounts
• Attend broker-hosted webinars and training sessions
• Read daily research reports
• Learn from each trade — success or failure

Quick Recap

• Commodity trading in Pakistan is done through PMEXusing futures contracts.
• Choose a PMEX-registered broker like Azee Securities.
• Fund your margin account and access MT5 for real-time trading.
• Review contract specs carefully before entering a trade.
• Use both technical and fundamental analysis in your strategy.
• Implement stop-losses and proper position sizing.
• Stay compliantwith tax laws and regulated processes.
• Start small and continue learning with every trade.

Get Started with Azee Securities

Ready to start your investment journey with Azee Securities? Open a Stock Trading Account and gain access to the Pakistan Mercantile Exchange (PMEX). Let Azee Securities help you make informed decisions. Our expert advisors, advanced trading platform, and real-time market data ensure you stay ahead of the curve.

Azee Securities Limited
Member Pakistan Stock Exchange | PMEX | NCCPL | CDC
SECP Registered & Regulated