What is Futures Trading & How to Get Started?

Published by Sharekhan Education | July 12, 2023

By Swapnil Joshi | Sharekhan Education

Introduction :

Futures trading is a form of financial trading where two parties agree to buy or sell an asset at a predetermined price and date in the future. The assets being traded could be commodities (such as oil, gold, or silver), or financial instruments (such as stock indices or currency futures).

The return on investment (ROI) in futures trading can vary widely and depends on various factors, including market conditions, trading strategies, risk management, and individual trading performance. timing of trades, risk management techniques, and individual trading skills. It’s essential to develop a trading plan, practice risk management, and continuously evaluate and adapt your strategy based on market conditions.

How to get started ?

If you are new to futures trading, it is advisable to thoroughly educate yourself, seek guidance from experienced traders or financial professionals, and consider starting with a small amount of capital that you can afford to lose.

Here are the basic steps to get started with futures trading :

1. Educate yourself:

Start by learning about futures markets, how they work, and the factors that influence them. Understand the terminology, trading strategies, and risk management techniques associated with futures trading. Numerous online resources, books, and trading courses are available with Sharekhan Education to help you learn about futures trading.

2. Define your trading goals and risk tolerance:

Determine your objectives for trading futures and assess the level of risk you are willing to take. Consider factors such as your investment capital, time commitment, and financial goals. It’s important to have a clear understanding of your risk tolerance before engaging in futures trading.

3. Choose a reputable broker:

Select a brokerage firm that offers futures trading services. Look for a broker with a good reputation like Sharekhan, a user-friendly trading platform, and a wide range of available futures contracts. However, ensure that the selected broker is regulated by the appropriate authorities. Complete the account opening process with your chosen broker. This typically involves providing personal information, verifying your identity, and depositing funds into your account.

4. Develop a trading strategy :

Create a trading plan based on your goals, risk tolerance, and market analysis. Determine the types of futures contracts you want to trade, your entry and exit strategies, and the amount of capital you are willing to risk per trade. Back-test your strategy using historical data or paper trading to evaluate its effectiveness.

5. Fund your trading account:

Transfer funds into your trading account to have the necessary capital for executing trades. Most brokers offer multiple funding options such as bank transfers, credit/debit cards, or electronic payment systems. Be aware of any fees or charges associated with depositing or withdrawing funds.

6. Start trading :

You can begin trading futures contracts once your account is funded. Use your trading platform to place buy or sell orders based on your trading strategy. Monitor the markets, analyze price movements, and make informed decisions. It’s essential to keep track of your trades, review performance, and continually adapt your strategy as needed.

8. Manage risk :

Implement risk management techniques to protect your capital. This may include setting stop-loss orders to limit potential losses, diversifying your trades, and avoiding excessive leverage. Risk management is crucial to long-term success in futures trading.

9. Stay informed :

Keep up to date with market news, economic indicators, and relevant events that can impact the futures markets. Continually educate yourself and stay informed about changes and developments in the assets you are trading. Remember, futures trading involves significant risks, including the potential for substantial financial loss. It is advisable to start with a small amount of capital and trade with money you can afford to lose. Consider seeking guidance from financial professionals or experienced traders before diving into futures trading.

Disclaimer :

Investment in securities market are subject to market risks, read all the related documents carefully before investing. For detailed disclaimer and registered office details visit link – https://www.sharekhan.com/disclaimer/Sharekhan_Education.html