Monday, 16 June 2014

HOW TO MAKE OR LOOSE MONEY IN FUTURE TRADING

In Future trading one can buy any number of shares. In Futures, the trader buys a lot. The lot magnitude is set for every futures contract and it varies from stock to stock & also from company to company.
Margin payment:-
Buying a Futures contract one need not pay the entire value of the contract but just the margin. This margin sum is defined by the exchange. Let’s assume one buys a 1000 Futures contract of a particular company each share costing 50 Rs. This will sum to Rs. 50000 (1000 X 50 Rs). The trader need to pay only about 15% to 20% of that sum and this sum is called the margin amount. Assuming 15% the trader need to pay Rs. 7500 & not Rs. 50000
How to make or lose money:-...

the trader purchased the share for Rs. 50 each and the next day the share moves to Rs. 52. The divergence is Rs 2 per share. Hence the trader gets a credit Rs 2000 (Rs 2 per share x 1000 shares).

The following day, it dips to Rs 49. The difference is Rs 1 per share (50 – 49)
Since the price has dipped, Rs 1000 (Rs 1 per share x 1000 shares) is debited from the account.
This will continue till trade the Futures contract expires. So on a daily basis money is gained or lost.

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