How to become an Advanced Futures Trader? – Step by Step Process

This article will explain the step by step process to become an advanced futures trader in Indian Market. Read the entire article & you will all the tricks of advanced futures trading.

Journey of an Advanced Futures Trader

We provide insights to become an Advanced Futures Trader in this article. You can expect a detailed explanation of every thing you must consider to step into the world of Futures Trading and become a pro at it.

Advanced Futures Trader

For most traders and investors, taking the first step into the world of investing is not a mere hobby. They are driven by a very actual and real motive and that is, to gain money.

The stock markets are not the same for everyone and while every trader on the floor in this market comes with a bag full of money, not each one leaves with more of those. The market witnesses a mix of every type of trader and investor.

Among these are wealthy merchants and houses that can spare a chunk of their money and afford to lose it easily.

But then there is an even number of investors who are just beginning their journey in the world of investment.

Often, they do not own as much capital as the wealthy investors and for them, there is a lot to lose should their investment turn sour.

Futures trading can help a modest investor in their quest to turn their capital into a mound of wealth.

Even new investors can trade in the futures segment of the market and make it big with their investment.

In time, every newbie in the futures market can also become a pro and learn how to trade.

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    Starting the journey as a New Investor

    Starting with zero knowledge about the world of investment can be a challenge. While an investor is new to the market, the risks and threats of losses are not new in the market itself.

    Thus, it is a task to reach a stage where an investor can actually become self reliant in the world of investing.

    More serious and adept traders usually understand the market operations quite well and know how to drive profits to their interest.

    Trading in futures is often seen as a way of earning returns in the form of a supplemental income.

    For any trader or investor, the challenge begins with stage zero, which is a place where they are not experts.

    This is a starting point to become an advanced futures trader.

    Make Trading, A Hobby to become an Advanced Futures Trader

    Everyone is a beginner at something at one point in time. This is a spot where a trader decides to learn the fundamentals of the futures market.

    Although risky and scary, it can be quite interesting to explore this section of the market. The fact that learning about futures can actually be a step in the right future is an incentive in itself.

    Think of this phase as a new hobby. You don’t quite know anything about it yet but you are determined to learn more about it.

    You will try and learn and make mistakes but at the end of it, you would have learnt something new.

    Learning about futures is somewhat similar to a hobby since there is a whole body of knowledge that you acquire and learn how to make bucks off it.

    At first, you might make errors and also fail but with practice, you will get right there.

    This is the next step towards becoming an Advanced Futures Trader.

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    Trying vs Testing: The right way to go

    To become an Advanced Futures Trader or to learn advanced futures trading, this is another step one must take.

    You may have already learnt about the markets and different approaches to applying a trade.

    Every trader likes to go their own way when it comes to putting their money in the market and then trying to reap gains out of it.

    Today, investors learn about different trading approaches out of books, videos and what not!

    It is common to feel that a certain way of trading is absolutely correct because you may have proof of its success right in front of your eyes.

    However, what you need to realize first and foremost is that there is always a difference between what you have learnt in a textbook and trading on the live platform.

    Also, it is not ideal to base your learning on an example by someone who is teaching you about futures.

    These examples do not account for market sentiments, present economic and political conditions and the trend of the market.

    Thus, such examples may be inefficient to highlight and draw out the flaws of using a particular trading approach.

    You can try and learn as much as you like. But when it is time to use your money for real, it is time to test.

    And this means discarding whatever you may have learnt and modifying your knowledge to the results of your test.

    An Advanced Futures Trader never leaves it on Luck

    Finding success at one or two trades alone might be a stroke of luck. Do not base your entire learning experience on these trades and fall under the illusion that the market only works one certain way.

    Often, feeling safe due to this initial success can pave the way to larger losses in the future.

    This happens simply because some investors cannot resist the urge to remain a learner while they are still indeed learning.

    This is not to demotivate any investor who is looking to start their journey with trading in futures. However, this is a true word of caution which can save you from the path to ruins.

    When trading in futures, an investor must be wise enough to foresee the possibility of making a loss. It is vital to set a limit up to which you are prepared to undertake risk and bear a loss.

    Along with your futures trading strategy, it is also vital to have an outlook on money management.

    Generating profits on a regular basis is definitely something likeable. But it is not a complete proof of your strategies working out positively and could be a mere stroke of luck.

    The main factor which determines your skills as a trader in the futures market is the ability to preserve your capital amidst a series of failed trades as well.

    Failing in a Strategy is not the end of the Road

    A beginner fails & stops his/her journey but to become an advanced futures trader, you must learn to accept failures & also learn from your failures. Always look for a long run.

    In the beginning, it is ever more likely to make mistakes. As long as the trader is aware that they are doing, no failure counts as a loss.

    At this stage, it is vital to test what you have tried and watch the results that it reaps for you.

    This is the point of stimulation which will help you cross to the next stage of trading in the futures market.

    Consider this as the stage of discovery which will let you learn the markets and adopt a sensible approach towards futures trading. The markets are dynamic and so should be an investor.

    If a beginner is able to take advantage of the learning which the market has to offer, perhaps they might be ready to move over to the next stage to becoming a futures trader.

    An Advanced Futures Trader makes Trading a Discipline

    When any trader begins to trade in the futures market, the number one strategy promoted for their interest is money management.

    This requires the preservation of capital, which is no less than a defensive strategy.

    Preserving your initial investments is vital since you cannot really afford to lose out on your money and account for losses.

    After all, losing money is what you are here for. Money management should not remain limited to a defensive strategy to bring down losses.

    Instead, it should help you make more money in the form of gains.

    A money management approach can make all the difference between loss and profits. And needless to say, it can be a huge one.

    Expecting Profits and Losses from a Futures Trade

    The distribution of profit and loss and trading as per the same is a metric that can help an investor decide if they must enter into a particular future or not.

    Let us take an example to understand the same. Discuss five different distributions of profits and losses, each one of them yielding a return of 35%.

    • Out of 12 months, 7 months display a negative return ranging between -5% to -20%. The remaining 5 show a positive return, between 2% – 6%, with the exception of one month where the returns are 105%. This system perhaps just appears to be lucky when it comes to the 35% return. The figure is certainly not reflective of the diversity in the returns for each month.
    • For the first two months, a dissimilar profit figure occurs, ranging from 10% – 60%. For the next 10 months, only a negative return occurs. Even though the system looks promising at first, the returns slowly dwindle in the months to come. Surely not something that would motivate an investor.
    • Each month displays either a random profit or a loss, measuring somewhat equal to one another. Again, this system happens to be profitable by 35% by chance, with no definite scope or outlook to profitability.
    • A system with smaller losses and big wins is something realistic and depicts what may happen if there were to be small losses during market situations. Depending on the ability of an investor to stomach risk, this may be a likeable system for an investor.
    • Yet another system could be one where the stock takes small steps towards more profits with occasional losses.

    The fact remains that as long as an investor really peeps into the distribution of the profits and losses of a futures option, they may not get a clear picture of the net annual returns.

    How to plan Profitability in the Live Market?

    To trade seriously, there are a few basic calculations which will need consideration. Basing your trade entirely on the system of technical analysis can be a dangerous strategy.

    A technical pattern cannot really help you predict the pattern with which futures will trade. They have little impact on demand and supply.

    Thus, fundamentals are meant only for beginners in the market. For the more serious and advanced trader, it is important to scrutinize the movement of the market and the trends which drive the movement.

    The difference between a beginner and an experienced trader does not lie merely in the fact that they actually trade in the market or not.

    How far are they able to draw a respectable profit from the market is what makes them different.

    Profits accrue to a professional trader due to their apt knowledge about trading. They understand every well about everything that there is to know about trading and knowing when to avoid one.

    They know how not to lose their money and instead, manage it to draw gains out of trades. Speculation is the last thing that they perform in the market and that is what makes them different.

    The general perspective of an investor

    On a wide scale, making money is what every trader is after! Serious traders consider it important to stay on the path of tracking market movements and testing new ways to make gains.

    Although they understand the importance of learning about the technical fundamentals of the market, they have little interest in following those fundamentals close to heart when looking for novel ways to catch the desired profits.

    Only after crossing the journey up to this point, can a beginner expect to advance. Becoming an independent pro at trading in futures goes through this road only.

    It is the point which dictates the difference between an independent and professional trader from a non professional one.

    Becoming an Independent Pro at Trading in Futures

    After trying and testing various approaches, you are likely to reach this place and become a potential pro at futures or an advanced futures trader.

    This spot will make you independent from a beginner and by this time, you are probably equipped with the knowledge that it takes to trade in futures.

    However, knowledge is not the only parameter which can make you a professional at futures trading.

    After all, having all the knowledge in the world and being able to apply it at the right time is the true test of knowledge.

    Many traders claim to be self sufficient at knowing the futures market, in and out. However, in reality, they find themselves unable to apply that knowledge in the right manner.

    So, knowledge does not merit any favour when it comes to pointing the difference between a beginner and a pro.

    At the same time, experience does not make much difference either. You are more likely to come across many traders who have been at the futures market for years. Yet, they may be unable to produce any record of satisfactory profits and gains.

    It is a myth that those with access to digital tools may be able to trade efficiently in the market. Let’s just say that it is indeed only a myth.

    Yet again, it is not even any special technique or strategy which may spell the difference between a beginner and a pro.

    The futures market can get as complex as one can imagine and with the rise in complexity, only the risk involved rises with an equal measure.

    So what basically makes a trader professional after all?

    It is basically just money. As long as a trader is able to generate gains out of the money that they invest, they can join the league of professionals who trade in the futures market.

    Failing to do so, might not invite them the merit to call themselves one. Many experts base their judgement about these criteria on the basis of income generation.

    So, if you are someone who generates at least 75% of their income through future trades, you are likely an independent professional of the market.

    It does not matter how you do it. You could be making use of some simple or sophisticated approaches to get it done.

    What matters is that you are able to spin money out of money and that’s what makes you a pro.

    Setting Up the Trading Psychology

    As a professional in future trading, it is necessary for you to continue your practice of trading. A steady stream of gains and returns will be rewarding and motivating for your interests.

    However, for some traders, a regular and monotonous routine of generating returns from a trade gets less thrilling as time passes.

    With greater risk comes greater anxiety and enthusiasm. However, any professional trader is unlikely to undertake a risk that they cannot handle.

    This is a route of caution and any investor who deviates from this path may invite doom to their investments.

    Being a professional trader in the futures market does not mean that you do not suffer losses. Several market conditions and money management streaks can spell mistakes.

    Thus, an experienced trader will always keep a contingency plan for such happenings and attempt to recover from the situation with a tactical strategy.

    Keeping a Tab on Industry Knowledge

    It may not be wrong to say that an experienced trader has complete knowledge of the industry he is trading in.

    Even the most experienced futures traders may often omit several vital factors of trade.

    But a professional always acquire the requisite knowledge of the exchanges through which futures operate.

    This includes several concepts such as the expiration of contracts, deliveries, liquidations, margins and a lot more.

    As a trader at this level, a professional is conducting no less than a business. The intricate world of futures trading is quite technical to understand for any trader.

    Making any error can amount to large losses and loss of motivation to continue trading in the market.

    However, most professional traders are always willing to keep their business alive. Usually, this is what makes them different than a common trader.

    The Business of Trading

    This is the final stage of skillset of an Advanced Futures Trader.

    Often, when traders have acquired a certain level of experience and skill at trading in the futures market, they wish to take a step forward.

    At this point, instead of only investing their own money, they feel ready to take up capital from other sources and make even greater returns out of it.

    So, many of them go forward to become trading advisors in the futures market. This is a whole new level for a professional investor and trader.

    Though, managing other people’s money is definitely something that will get you to places.

    Alongside the consultant’s perspective

    Usually, such traders have to undergo some regulatory work to undertake to trade in the futures segment.

    There are certain rules to the position which are applicable to all investors. They are also applicable to consultants who take up the task to manage other people’s money.

    While it may look attractive at first, it is a lot of tasks to do. Additionally, you will have to undertake the job to trade with all the money which you collect from other people and there is an added responsibility to make returns out of it.

    As a trader, your skills and knowledge will need to come together to reap benefits for those who have entrusted their money with you.

    Only as long as you are able to deliver satisfactory and desirable results, will you be able to attract more people to pool in their money with you.

    Your favorable streak of gains as a trader will be able to bring favorable capital from investors who also wish to grow their money, same as you.

    This entire business model will run on several concepts of marketing, sales and relationship building.

    Thus, it will be a lot of work for you but it will be equally exciting and motivating since you will make a handsome return out of it.

    As a trader, it is completely up to you whether you wish to remain a mere professional trader. You can also acquire additional capital from investors and trade in it as well.

    To Conclude Advanced Futures Trading

    This article covers the journey of a beginner who starts trading in futures. And it spans the point where they become a full fledge professional trader.

    As has also been highlighted, a professional trader need not stop at making gains out of their own money alone.

    They may also collect additional capital from other investors and plan to widen their profits and returns.

    In the end, it is all about how far your motivation deems to carry you, and how well you can utilize your money management skills.

    While you need experience and skills to trade, you, more importantly, need money to make more money in the futures market.

    Open a Demat Account Now! –  Start Trading in Futures

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