📘 Futures Explained
Part of Complete Stock Market Learning Series
📌 What is a Futures Contract?
A futures contract is a legal agreement to buy or sell an asset at a fixed price on a future date.
The underlying asset can be a stock, index, commodity, or currency.
📊 Key Features of Futures
- Standardized contract (lot size & expiry)
- Traded on exchanges
- Requires margin, not full value
- Highly liquid instruments
⚠️ Futures and Leverage
Futures trading involves leverage, meaning you control a large position with a small amount of capital.
- Higher profit potential
- Higher loss risk
- Losses can exceed initial margin
🕯 Simple Futures Example
Suppose:
- ABC stock is trading at ₹1,000
- One futures lot = 100 shares
- Contract value = ₹1,00,000
- Margin required = ₹20,000
If the price moves by just 2%, profit or loss is calculated on the full ₹1,00,000 — not on margin.
🛡 Why Traders Use Futures?
- Hedging portfolio risk
- Speculating on price movement
- Trading both up and down markets
- High liquidity and flexibility
❌ Common Futures Trading Mistakes
- Ignoring stop loss
- Over-leveraging positions
- Trading without a plan
- Holding losing trades too long
⚖ Important Risk Warning
Futures trading is not suitable for everyone. It requires discipline, strict risk management, and emotional control.
🚀 Trade With Knowledge
Futures reward disciplined traders and punish emotional decisions.
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