In the Indian Derivatives Market, Nifty Futures contracts play a unique role. It is the most widely traded marketplace for trading in Futures and involves high liquidity when it comes to Futures Contracts. Nifty Futures is believed to be among the top 10 Index Futures contracts globally. Trading in them is considered a proxy for trading the market.

These Derivative contracts have the Nifty Index as their underlying asset, representing the market and economy fairly. When the value of the Nifty increases, the Nifty Futures price goes up, whereas when its value goes down, the cost of Nifty Futures contracts decreases.

Things to remember

Before you start trading actively in Nifty Futures, you should remember these essential points:

Treat leveraged position accordingly

Like all Futures positions, Nifty Futures are also leveraged. This means that both your profits and losses can get multiplied. Hence, trading in Nifty Futures with strict stop profit and loss targets would be best. This trading technique lets you ward off potential risks.

Spread over spot price

Futures contracts are typically traded at a spread over the spot price. Hence, you should understand the logic of the spread before trading Nifty Futures. This knowledge will, in turn, be profitable for you. Keep a watch on the following things:

• Do not rush to purchase when the Nifty Futures contracts are trading at a discount.
• Skip buying when they are trading at a steep premium to the spot index.

To be sure before buying, you can check the price of Nifty Futures today online.

Mind the overnight risk

If you place stop losses during the day, these orders do not cover the overnight risk. Therefore, if you choose a long position on any Nifty Futures contract, you can run the risk of overnight trading, which could lead to losses.

Check data on open interest

It never hurts to analyse scientific data before taking a Nifty Futures position. Instead, some fundamental data analyses are fruitful in your trades in the Nifty. You can also get live updates easily by checking Nifty Futures live online. However, ensure you refer to a reliable website.

Multiple margin implications

Whether you sell or purchase Nifty Futures, it is a linear position since it leads to unlimited losses and profits on both sides. While it is a must to have stop-loss targets when trading the Nifty Index, you should also understand the margins. There is also an initial margin that you should pay when you take the position. Secondly, it is imperative to pay mark-to-market or MTM margins daily based on the movements in the price. Both have capital allocation implications for you.