Trading Nifty Futures: Things to remember

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Trading Nifty futures is a common indicator of trading in the market as a whole, as the Nifty is fairly representative of the market in particular and the economy in general. Nifty futures are essentially futures contracts on Nifty. Obviously, when you trade a Nifty future, you have considered the state of the economy and other factors. The minimum lot size for the Nifty is 75 units, bringing the lot value to just over Rs.7.50 lakhs. What are the Nifty futures trading tips and what are the Nifty futures trading techniques? Let's understand some points to remember that will help us trade Nifty futures intraday and longer term.
The Nifty Futures plays a very special role in this. This is the most traded marketplace for trading futures instruments and has the most liquidity in terms of futures contracts. In fact, it may surprise you to learn that the Nifty Futures is probably among the top ten index futures contracts in the world. Once you feel comfortable in the futures trading niche, you will be active in trading Nifty Futures and know terms like Nifty Future stock price and other commonly used expressions. If you already know the basics, you can read up on Nifty Futures and keep a few things in mind before trading seriously.
A Brief Lesson on Nifty Futures
As you may already know, the futures instrument implies a derivative contract. It derives its own value from each underlying asset. In the context of Nifty futures, the underlying asset is the index itself. Therefore, the Nifty future derives its value from the Nifty index. Therefore, as the price of the Nifty Index increases, so does the value of the Nifty futures. In the same way, whenever the index falls, there will be a fall in the futures.
Check the futures spread over spot before trading 
Futures are usually traded with a spread above the spot price. Under normal conditions, the monthly spot rate spread is determined by the current cost of financing. It's also known as the carry cost, and futures typically trade at a premium. There are two things to remember here. Do not buy Nifty Futures when the Nifty Future stock price is at a high premium to the spot index as this could be a case of overvaluation and over-optimism. Also, do not jump in to buy when the Nifty futures are at a discount as this could be a sign of aggressive futures selling. Understand the logic of the spread before trading Nifty futures. This could be profitable for you instead of risking some losses that you may not be able to afford.
Check data on open interest before taking a position
It always pays to do some scientific data analysis before taking a nifty futures position. Hard data analysis can prove fruitful in your trades in the Nifty. A quick look at Nifty futures open interest and its accumulation trends will give you an idea of ​​whether open interest is building up on the long or short side. You can get a more informed view of Nifty's direction.

Avoid getting in a liquidity trap
It always pays to do some scientific data analysis before taking a nifty futures position. Hard data analysis can prove fruitful in your trades in the Nifty. A quick look at Nifty futures open interest and its accumulation trends will give you an idea of ​​whether open interest is building up on the long or short side. If you are interested in liquid markets, Nifty is for you. Liquidity is never a major challenge for the Nifty futures as it is one of the most liquid contracts, but there are occasions when the Nifty futures can fall into your liquidity trap. First, on the expiry date, you will typically find that Nifty futures volume disappears once the rollovers are essentially complete. Also, in a market that is falling very sharply, spreads can widen, significantly increasing your risk when trading Nifty futures.
There are multiple margin implications
Whether you are buying nifty futures or selling nifty futures, it is a linear position as it can result in unlimited gains and losses for both sides. While stop losses are a must when trading Nifty, one must also understand margins. First, there is an initial margin that you pay when entering into the position, which includes VAR margin and ELM margins. Now it is mandatory for brokers to collect these two margins and ELM is no longer optional. Second, you must pay daily MTM (mark-to-market) margins based on price movement. These affect the allocation of capital for you.

Keep a tab on the dividends, transactions costs and tax implications
When you trade Nifty futures, remember that you are trading real money, so three things are important. First, futures do not earn dividends and therefore dividends cause futures to trade at a discount. Keep this in mind when taking a position. Second, there are brokerage fees and legal costs associated with trading Nifty futures. This affects your breakeven point. Finally, Nifty futures are treated as securities for tax purposes, so any gain or loss is treated as a capital gain or loss and the tax implications apply accordingly.