How to trade in Nifty Futures?

Nifty Futures are derivative contracts listed on the Nifty 50. They get their value from their underlying index, i.e., Nifty 50. This way, if the value of the index goes up, so does the value of the Futures contracts. Likewise, if the Nifty drops, the value of the contracts decreases accordingly. Trading in Nifty Futures allows you to cover the entire market, as the Nifty represents the market and the economy.
It helps establish a consolidated view and minimise stock risks. It also enables you to hedge the risks with index futures. But to reap such benefits, you must trade wisely. So, here is a quick guide.
Mind the leveraged positions
Like every Futures position, Nifty Futures positions are also leveraged. In the case of normal trade, the investor gets a 10% margin. However, for intraday trade, they get a 5% margin. This implies that the profits and losses are multiplied. Therefore, investors must be careful when looking into leveraged positions. 
Consider the Futures’ spread
Usually, Futures trade at a spread over the spot price. In most cases, the prevailing cost of funds determines the monthly spread over the spot price. This is also known as the ‘cost of carry’, wherein the Futures quote at a premium. Hence, you should avoid buying the Nifty Futures when their share price is at a steep premium to the spot index. Also, review the Nifty 50 today to gauge the spread better. This way, you can dodge overpricing.
Stay away from liquidity traps
Nifty Futures provide liquidity. However, you must avoid falling into liquidity traps. There could be times when on the expiry day, you could find the Nifty Futures volumes disappearing once the rollovers are completed. There will also be times when the spreads can widen, increasing your trading risks. Be mindful of such scenarios when chasing liquidity.
Assess the counterparty perspective
Every Nifty Futures position has a counterparty. The same can be a trader or a hedger. When you plan to enter a contract, it is best to assess the seller’s intentions. Follow the same approach even when trading in other assets like a Sovereign Gold Bond. This further helps you reason with the price levels and offer you the necessary clarity.
Be wary of overnight risks
If you have selected a long position on a Nifty Futures contract, you can be on the receiving end of the risk of overnight trading. This might eventually attract further losses. Thus, mind your exposure to overnight risks.
Watch out for additional costs
Nifty Futures often hold brokerage and statutory costs, which could impact your breakeven point considerably. Since profits and losses from Nifty Futures are capital gains or losses, you garner tax implications on the same. This leads to you bearing additional costs. Therefore, keep a close eye on these expenses to save money effectively.