Futures
A futures contract is a type of financial instrument that establishes an agreement between a buyer and a seller. Under this contract, the buyer agrees to purchase a derivative or index at a predetermined future date for a specific price. This setup allows for the negotiation of financial instruments or physical commodities for future delivery at a pre-agreed price.
In our recommendations, all trades are normal (NRML) and involve either index futures or stock futures positions. We emphasize that there is no set validity period for these trades. The decision to exit a trade is at our discretion and can range from a day to a week or even longer. It's important to note that we do not engage in intraday trading. Our approach is not to recommend trades on a daily basis; instead, we focus on identifying and capitalizing on favorable opportunities in the market as they arise.
Risk Involved
Futures prices are known for their high volatility, often experiencing rapid shifts. These changes are primarily driven by variations in the supply and demand of the underlying asset, as well as by economic and geopolitical shifts. The nature of futures trading demands that traders uphold a substantial margin.
Traders engaged in futures trading are required to maintain minimum margin requirements to keep their positions active. In scenarios where market trends are not in the trader's favor, they might be obligated to inject additional funds to meet these margin requirements. This aspect underscores the dynamic and sensitive nature of futures trading.
Furthermore, the actions of various institutional investors such as Foreign Institutional Investors (FII), Foreign Portfolio Investors (FPI), and Domestic Institutional Investors (DII) play a significant role in influencing futures prices. Their decisions to buy or sell can introduce considerable volatility into future prices, adding to the complexity and risk inherent in futures trading.