InvestorQ : Is there a way for me to reduce my risk in trading futures?
Nikita Damle made post

Is there a way for me to reduce my risk in trading futures?

Answer
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shivangi Arora answered.
2 years ago


As a futures trader, your primary focus should always be on managing risk. Whatever it takes to preserve your capital in a certain range, need to be taken. It could be stop losses, profit booking, hedges etc. But you can never ever trade futures successfully if you forget this cardinal rule. Secondly, do an equity mirror trade only when you have absolute conviction. After all, you also need to justify your rollover and transaction costs.

Avoid spreading yourself too thin. Having simultaneous position in 15-20 different stock and index futures is outrageous. You just cannot keep a tab on all these positions and also track their news and numbers. I always recommend that you should limit yourself to 4-5 open positions at any point of time. And lastly, don’t forget transaction costs. Brokerage, STT, stamp duty, exchange fees and rollover costs add up to a tidy sum. Factor them when you set stop losses and profit targets. The moral of the story is that don’t use up all your available capital as margins for futures. You need to provide for MTM margins, special margins, volatility margins etc. You surely do not want to get into a fire sale mode when there is a crisis in the markets.