28 Oct, 2025
5 mins read
If you’ve ever watched stock prices move and thought, “I bet I know where this is headed,” then you’ve already stepped into the mindset of a futures trader. Futures trading is about acting on that belief - not by owning the stock, but by predicting its next move. It’s quick, analytical, and sometimes nerve-wracking, but that’s what makes it interesting.
This piece will walk you through what futures trading means, how it really works, and why it attracts so many market participants.
In simple terms, futures trading means buying or selling a futures contract - a legal deal to buy or sell an asset at a specific price on a specific date later on. These contracts are standardised and traded on regulated exchanges such as the NSE and BSE.
When you enter into a futures contract, you’re agreeing to a transaction that will happen in the future. You don’t take ownership immediately; instead, you’re fixing a price now for a deal that will take place later. This setup lets traders speculate on price direction or use it as a shield against volatility.
You’ll find futures contracts for equities, indices, commodities, and currencies - each one designed to fit different trading goals.
People use futures for different reasons, depending on what they want out of the market:
Speculation: Some traders take positions based on where they expect prices to move.
Hedging: Long-term investors use futures to protect their portfolios from short-term swings.
Leverage: You can control a large position with a relatively small margin deposit, which magnifies potential gains - and losses.
Short selling: Futures make it easier to profit from falling prices, as you can sell first and buy later.
In short, futures let traders express an opinion on the market in a way that’s more flexible than traditional stock ownership.
Every futures contract comes with a few non-negotiable details:
Lot size: The number of units that make up a single contract.
Expiry date: The last day the contract is valid - usually the final Thursday of the month.
Margin: The initial amount you need to put down to open a trade.
Mark-to-market: A daily process where your profits or losses are adjusted based on market movements.
Example:
Imagine a futures contract for XYZ stock with a lot size of 100 shares, trading at ₹500. If the margin requirement is 20%, you’ll need ₹10,000 to open the position (₹500 × 100 × 20%).
If the price rises to ₹520, you’ll gain ₹2,000. If it drops to ₹480, you’ll lose ₹2,000. These daily adjustments continue until you close the trade or the contract expires.
A small change in price can have a big impact because of leverage, so it’s worth monitoring your trades closely.
Here’s how you can get started with futures trading in India:
Open a Trading and Demat Account
Pick a SEBI-registered broker such as FYERS that offers derivatives trading. Complete your KYC and enable the futures segment.
Learn About Margins
Understand the margin system. Both initial and maintenance margins are required. If your funds fall below the maintenance level, you’ll get a margin call.
Use a Reliable Trading Platform
A good platform shows live market data, allows quick order placement, and helps you manage open positions.
Start Small
Begin with index or liquid stock futures before you take larger positions. It’s easier to learn market movement patterns that way.
Keep an Eye on Your Trades
Monitor your positions daily. Insufficient margin or a sudden price swing can result in automatic square-offs.
Trading futures successfully isn’t about guessing right every time — it’s about managing risk better than most people do.
Advantages
Leverage: Lets you trade big with less capital.
Liquidity: Futures markets, especially for indices, are very active.
Transparency: All contracts are exchange-traded and regulated.
Two-way trading: You can profit whether the market moves up or down.
Price discovery: Futures often reflect market sentiment before it shows elsewhere.
Disadvantages
High risk: Leverage can amplify losses.
Complexity: Understanding margin, expiry, and pricing takes time.
Time pressure: Contracts expire, so you must manage trades actively.
Emotional strain: Quick moves can cause stress or impulsive reactions.
No dividends: Futures traders don’t get company benefits or payouts.
Every trader should weigh these points before deciding whether futures fit their style and goals.
Futures trading isn’t just about numbers on a screen; it’s about understanding how people behave when money is at stake. The market rewards patience and precision, not hunches.
If you’re new to it, begin small, study consistently, and learn how to handle both wins and losses. Once you get the rhythm, futures can become a smart addition to your overall strategy - part protection, part opportunity.
The market won’t wait, but it always rewards those who come prepared.
It means buying or selling a contract to trade an asset at a fixed price on a future date. These contracts are standardised and traded on regulated exchanges.
When you buy a stock, you become a shareholder. A futures contract only commits you to a transaction later - ownership occurs only if delivery happens.
A good grasp of technical analysis, market trends, and margin mechanics is essential. You should also understand risk management.
No. Futures are mainly for short- to medium-term trading. They have expiry dates and don’t provide dividends or ownership benefits.
Calculate your Net P&L after deducting all the charges like Tax, Brokerage, etc.
Find your required margin.
Calculate the average price you paid for a stock and determine your total cost.
Estimate your investment growth. Calculate potential returns on one-time investments.
Forecast your investment returns. Understand potential growth with regular contributions.
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