NIFTY covers 60 percent of the total market capitalization and is described as an index of 50 blue chips companies. These companies are listed in National Stock Exchange (NSE) and the performance of these companies is represented by Nifty.
Trading done on future basis allows investors to speculate stock indices, interest rates and other financial securities on the future price of commodities. It allows investors to hedge their exposure to commodities. Future trading also allows producers to fix the prices for the goods that they are buying or making. This trading occurs on future markets all around the world.
In Nifty Futures, a financial instrument, future contracts are done on the basis of the benchmark of NSE which is S&P Nifty index. The trading cycle of nifty future is three months. The first month is near month, the second month is next month and the third is far month. Last Thursday of the expiry month is considered to be the settlement day for Nifty future. In case, the last Thursday is a holiday, then the last trading day is taken as a settlement day. As far as the settlement price is concerned, it happens to be the closing price for the underlying stock for the day.
How to trade in Nifty Futures?
To trade in Nifty Futures, you have to follow the below steps:
• Firstly, you will have to open an account with a broker that deals in nifty futures. You will have to fill out an application of futures trading account. Then, you have to wait for an approval before transferring funds. Before choosing the broker, make sure that the broker offers access to Nifty futures.
• The best way is to trade in the most liquid contract month. The last month of the contract is the most liquid month. For example, in October and November, the November futures market is the most liquid. Because the November is the expiry month, trading volume rolls over to the December futures market.
• You also need to sell your contracts in order to close out the trade, Suppose, you bought four October E-mini contracts, then, in order to close out your trade, you need to sell all the four October E-mini contracts. In case you want to take your position over to the next contract month, you need to accordingly instruct your futures broker.
Intraday Nifty Futures Trading
Trading is also done on daily basis. In intraday trading, traders tend to make profits through single day price fluctuations in stocks and index. To make huge profits, here are some strategies that you can undertake:
• Before choosing an intraday nifty futures stock to trade, you should check its total selling and buying quantity. Increasing buying quantity implies rising stock and vice versa.
• All decisions cannot be taken on the basis of speculations. You need to wait for the right price before you start trading.
• The nifty futures stock market is very unpredictable in the sense that it might behave just the opposite to what you had expected. Due to this, traders suffer huge losses. You might suddenly hear bad news and the entire stock market is upside down. So, in order to avoid losses in such situations, you need to put a strict stop-loss limit.
• It is very important to remember not to invest or put all your capital in a single stock. You should not expect huge profits from a single stock. The best strategy is to trade in different stocks and make small profits from each stock. This will help you make good returns from your trading.
• You should never be impulsive while trading in nifty futures. You need to wait, watch and then decide how to trade in nifty futures. You need to watch for the right stock to put in your capital.
Today, the futures market has become one of the world’s primary market places. This is the market where the buyers and sellers exchange future contracts between them. But it is not necessary that all the traders have the same objective in trading nifty futures stock.