Home/Blogs/Tips for Futures Trading

Tips for Futures Trading

Derivatives such as futures are an excellent way to create wealth in the short-term. They allow you to leverage the price movement of the asset to generate returns without having to take delivery of them. Also, thanks to the concept of leverage, you can take up large future positions by just paying a fraction of its total value as margin. However, if you’re planning on getting into derivatives in the near future, here are some valuable futures and options trading tips that you can follow. 

Tips for Getting Into Futures Trading

By diligently following the below-mentioned tips, you can not only ensure that you get the hang of futures trading, but can also lower the risk and increase the chances of getting returns.

1. Pick an asset 

When it comes to futures, there are many assets that you can choose to trade in. You can choose to trade in future contracts of stocks, commodities, interest-rates, or currencies. Now, keep in mind that irrespective of the asset that you choose, the concept of futures remains the same. Also, here’s another thing that you need to know. 

In the case of stock futures, not all stocks listed in the exchanges have derivative contracts that you can trade in. As a matter of fact, there’s an exclusive list of F and O stocks who have futures contracts that you can trade in. This list usually only includes large cap companies and sector leaders like Reliance Industries, Infosys, and TCS, among others. 

2. Get to know what moves the asset 

Once you’ve chosen the asset whose future contracts you wish to trade in, the next thing you need to do is try to understand the factors that influence their price movement. This along with technical analysis will make it easier for you to gauge the future price movement of the asset. 

For instance, in the case of stocks, some of the factors that influence the price movement of a stock are the company’s financial performance and industry demand. Likewise, in the case of commodities, the amount of supply and demand for the commodity and geo-political news are major influential factors.

3. Consider both long and short positions

This is one of the most important futures and options trading tips that you absolutely need to follow. Most traders usually stick to purchasing futures contracts (taking on long positions). Here, you only get to make returns if the price of the asset moves up in the future. However, you can also generate returns if the price of the asset falls as well by selling futures contracts (taking on short positions). Once the asset has fallen according to your expectations, you can exit by squaring off your position. 

4. Always protect your positions 

Another major tip that you need to follow if you’re getting into futures trading is this one. Since futures trading is highly risky and can be volatile in nature, it is important for you to protect your positions. You can do this by placing a stop loss trade, which is designed to automatically square off your position if the price movement doesn’t go according to your expectations. Stop loss trades can limit the losses that you suffer due to unexpected price movements. 


Here’s another one in addition to the futures and options trading tips mentioned above. Always form a trading plan or a strategy before getting into futures trading. The plan should include entry and exit points, stop losses, and targets. Once you form a plan, stick to it no matter what. This will enable you to enjoy better success.

Alternatively, if you feel that futures trading is not for you, you can always look at investing in upcoming IPOs. Irrespective of what you choose, always ensure that you have a demat and trading account in your name. Without one, you cannot invest in the financial markets. Visit Motilal Oswal today to open a demat account within just a few minutes. 


Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account | Understanding the economics of Nickel trading on the MCX | MCX Meaning - Learn What is MCX, Its Advantages, and More

You may also like…

Be the first to read our new blogs

Intelligent investment insights delivered to your inbox, for Free, daily!

Partner with us
Become a Partner