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Learn how to start trading in Nifty future derivative in Indian stock market
Trading in Nifty future derivative has many advantages and in below section we have explained how to trade and its benefits and risk involved.
1. What is Nifty future and how trading is done?
2. Advantages of trading in Nifty futures
3. Daily intraday trading tips for Nifty futures
4. Risks Involved.
Please note - Following information is written in very simple language without using complicated technical terms, this will help all new comers to understand and learn the Nifty future trading.
1. What is Nifty and how trading is done?
a. Nifty50 is the Index of Indian share market on NSE (National Stock exchange) like Sensex on BSE (Bombay Stock Exchange)
b. Trading is done on Nifty in terms of contract which is also called as Nifty future derivative contract. Nifty derivative movement is based on Nifty50 index. In stock market language Nifty50 index is called as “underlying of Nifty future contract"
c. Nifty Lot Size -
Nifty derivative contract consist of a lot of 75 quantities of Nifty. So if you want to buy Nifty a contract then you have to buy at least one lot. The trading in Nifty contract is done in lots.
d. Nifty Expiry -
There is expiry date for Nifty future contract. The Nifty future contract expires every last Thursday of the month.
In Indian stock market, we have three month's future derivatives for trading.
For example - In the month of October, we have October, November and December month Nifty derivative for trading. Current month derivative contract will have more liquidity (more volumes) as compared to other two months derivatives.
A new contract is introduced on the trading day following the expiry of the current month contract. If the last Thursday is a holiday then contracts expire on the previous trading day.e. Based on your trading position your account will get adjusted on daily basis as per the closing price of Nifty derivative contract.
For Example - If you buy one lot of Nifty at 8500 and Nifty closes at 8550 then Rs 50 as profit (total profit will become 75 qty x Rs 50 = Rs 3750) will get credited in your account. On the other hand if Nifty went down Rs 50 then Rs 3750 will be debited from your account.
If you do not have balance in your trading account then very next day your position will be squared off by your broker. Some brokers provides some extra days to transfer money in your trading account.
f. If you buy and sell on a same day then the profit and loss will be adjusted in your trading account accordingly.
g. Trader has to square off the positions before or on expiry. If you does not square off then the contract expires on the expiry date and the money gets adjusted in your account.
h. You can buy and sell Nifty derivative contract in your trading account/terminal. Separate account is not required.
Amount required to trade in Nifty future contract
The amount required to trade in one lot of Nifty future derivative is Rs.70,000 (approx) and in one lot there are 75 quantities of Nifty.
Basically when we see the actual amount then it much bigger for example - Current Nifty value is 8500 and one lot consist of 75 quantities so the amount comes to Rs 637500 but broker allow to trade by using only margin amount. Rs 70,000 is not fixed for all the time as the underlying Nifty50 value varies accordingly the price of one lot of future contract also varies.
2. Advantages of trading in Nifty future derivative contract
a) You can do trading on Nifty future in bullish (first buy and then sell) and bearish (first sell and then buy) market scenarios and on top of this you can hold the position till the expiry period of the contract. This is the biggest advantage of trading in Nifty future derivative.
For example - If markets are bearish and falling then you can sell the Nifty future contract and then you can buy at lower side. On the other side if market is going up then you can buy and then sell once the price goes up.
b) Trader gets margin amount to trade in Nifty derivative contract
For example - Nifty derivative contract consist of 75 quantity of Nifty index so the cost of one lot will become Rs 6,37,500 [75 qty of Nifty multiply by the price of Nifty50. Current price is 8500 (Sept 2016) but you can trade with only Rs 75,000. So if you can less than one lakh rupees then you can start trading in Nifty futures.
c) You can do day trading (Intraday trading) as well as carry forward (hold your nifty positions) till the expiry period of your contract (minimum one month expiry and maximum three month expiry)
d) Very Low brokerage rates. Low brokerage rates increases your profit percentage. We are offering very low brokerage rates. If you are interested to open the Demat account then please at Demat account opening page. Current brokerage rate is Rs 20 for buying and Rs 20 selling.
e) High liquidity - Very high volumes are traded in Nifty future contract which will make the trader to square off at any time and at any price.
3. Risk Involved in Nifty future trading
Trading in Nifty derivative future requires experience and market knowledge. If you are new to share market and trading then you should do paper trading practice and if you get success then you can start trading with actual trading.
Trading in Nifty future is a risky, heavy loss can occur.
Basically trading involves big risk either you trade in Nifty future or in any other future contract or in stocks. Trading requires lot of experience and market knowledge. Investing and trading are two different factors in share market. Investing is not as risky as trading.
For more information - NSE website
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