🧾 Introduction
Future trading is one of the most popular derivatives trading methods in India, used by both beginners and professional traders to hedge risk and earn profits. However, without proper knowledge of contracts, margins, risks, and taxation, futures trading can result in heavy losses.
This Saving Mantra guide explains the step-by-step process for future trading in India, from opening a trading account to execution, risk management, and tax compliance.
📈 What Is Future Trading?
A futures contract is a legal agreement to buy or sell an asset at a predetermined price on a specified future date. In India, futures are traded on:
- Equity (Stocks)
- Indices (NIFTY, BANK NIFTY)
- Commodities
- Currencies
Futures trading is regulated by SEBI and executed through recognized stock exchanges.
👥 Who Should Trade in Futures?
- Beginners with basic market understanding
- Active traders seeking leverage
- Hedgers protecting portfolio risk
- Professional traders & institutions
⚠️ Futures trading is high-risk and not suitable for casual investors.
📝 Step-by-Step Process for Future Trading in India
Step 1: Learn the Basics of Futures
Understand:
- Contract size & lot size
- Expiry date (weekly/monthly)
- Margin requirement
- Mark-to-market (MTM) settlement
💡 Futures involve leverage, amplifying both profit and loss.
Step 2: Open Trading & Demat Account
You need:
- Trading account
- Demat account
- Linked bank account
Complete KYC using:
- PAN
- Aadhaar
- Address & bank proof
Step 3: Enable F&O Segment
- Request broker to activate Futures & Options (F&O)
- Sign risk disclosure documents
- Complete suitability declaration
Step 4: Understand Margin Requirements
Margin includes:
- Initial margin
- Exposure margin
- Additional volatility margin (if applicable)
⚠️ Insufficient margin can lead to forced square-off.
Step 5: Select the Right Futures Contract
Choose based on:
- Liquidity
- Volatility
- Expiry cycle
- Market trend (bullish/bearish)
Popular contracts:
- NIFTY Futures
- BANK NIFTY Futures
- Stock Futures
Step 6: Place Futures Trade
- Choose Buy or Sell
- Enter quantity (lot size)
- Place market or limit order
- Monitor MTM profit/loss
Step 7: Risk Management Is Mandatory
Use:
- Stop-loss orders
- Position sizing rules
- Risk–reward ratio
- Avoid over-leveraging
💡 Professional traders focus more on risk control than profit.
Step 8: Exit or Square Off Position
- Square off before expiry, or
- Hold till expiry for settlement (cash-settled contracts)
📊 Taxation on Futures Trading in India
- Futures income is treated as Non-Speculative Business Income
- Taxed as per income tax slab rates
- Loss can be carried forward for 8 years
- Tax audit may apply based on turnover & profit
📌 Filing is done using ITR-3.
❌ Common Mistakes Traders Should Avoid
- Trading without stop-loss
- Overtrading due to leverage
- Ignoring margin calls
- Not maintaining trading records
- Incorrect tax reporting
✅ Benefits of Futures Trading
- Leverage with lower capital
- Profit in rising or falling markets
- Portfolio hedging
- High liquidity
- Short-term trading opportunities
🤝 Why Choose Saving Mantra for Traders?
- F&O tax & compliance expertise
- Accurate turnover & audit evaluation
- Trader-friendly advisory
- Loss carry-forward planning
- End-to-end ITR & compliance support
👉 Trade smart and stay tax-compliant with Saving Mantra.
⚠️ Disclaimer
This article is for educational and informational purposes only and does not constitute investment, trading, or tax advice. Futures trading involves substantial risk. Please consult a SEBI-registered advisor or tax professional before trading or filing returns.