A trade on an intra-month period. Which is better? Cash segment or Futures?

T

ThirdWay

New Member
#1
#1
Hello people,

Beginner here.

Supposing I plan to take a position on a share which i don't plan to extend beyond one single month. Which route is better ?

Use cash segment?

OR

Trade in the futures segment ?

The only reason I am asking is that I notice the brokerages are much less in the Futures segment than in the cash segment.

(This maybe be a stupid question but experienced guys please bear with me here. I am hoping to learn something)
 
G

gsri

Member
#2
#2
Dear thirdway

In futures lot size is fixed, whereas in cash market the qty that you want to trade is flexible. So you can try in futures only if your money management rules permit the risk involved in trading higher lot size .

Just lower brokerage cannot be reason for trading in futures!
 
T

ThirdWay

New Member
#3
#3
gsri said:
Dear thirdway

In futures lot size is fixed, whereas in cash market the qty that you want to trade is flexible. So you can try in futures only if your money management rules permit the risk involved in trading higher lot size .

Just lower brokerage cannot be reason for trading in futures!
Click to expand...
Ah ok gsri. Thanks for the information.
 
T

ThirdWay

New Member
#4
#4
A further question if i may gsri

What is the outlay required for trading in futures as compared to trading in the cash segment?

For example .If x is the minimum amount of money required to trade in cash segment for a given scrip, what would the amount be for the futures segment ? 100x, 1000x?

(Yeah I know that in futures trades are on margin and that its the profits and losses that get squared off. So i am talking about the equivalent amount here. I am also aware of the leverage effect)

If the answer to that is variable, then can you please tell me based on on YOUR experience?

If I were to re frame the question it would be like this. I fully understand that when you trade in the futures segment you put more money at risk. That being said, is there a brokerage advantage in futures trading when compared to the cash segment if you are taking an intra month position?
 
Last edited:
N

NOMINDTR

Well-Known Member
#5
#5
ThirdWay said:
A further question if i may gsri

What is the outlay required for trading in futures as compared to trading in the cash segment?

For example .If x is the minimum amount of money required to trade in cash segment for a given scrip, what would the amount be for the futures segment ? 100x, 1000x?

(Yeah I know that in futures trades are on margin and that its the profits and losses that get squared off. So i am talking about the equivalent amount here. I am also aware of the leverage effect)

If the answer to that is variable, then can you please tell me based on on YOUR experience?

If I were to re frame the question it would be like this. I fully understand that when you trade in the futures segment you put more money at risk. That being said, is there a brokerage advantage in futures trading when compared to the cash segment if you are taking an intra month position?
Click to expand...
To put is simple, Equity is better in every aspect.
 
G

gsri

Member
#6
#6
Dear third way

I would put it like this.

From your question it appears that , arranging any amount of money for trading is not a problem for you. Is it so ?? (For most people it is not !.)

In that case the steps are --

First arrange the money ,

Then calculate 2% of that capital as your max Risk per trade.

Then take any trade you wish, based ofcourse on a trading plan. this trading plan would indicate the exit price for you if things go wrong.( Which happens very frequently ! )

Here comes the impt part. The qty that you trade now depends on your max Risk of 2% of your capital. Since qty traded is dependant on capital, the market that you trade ( cash or futures ) is also dependant only on this.

With this limitation, if you take a trade in futures and the probable loss considering the lot size , which is different for different scrips is still within your max Risk ( based on your capital ) , then by all means trade in futures because it surely costs less brokerage. Otherwise you have no option but to trade in Cash market.

Regards
gsri
 
T

ThirdWay

New Member
#8
#8
gsri said:
Dear third way

I would put it like this.

From your question it appears that , arranging any amount of money for trading is not a problem for you. Is it so ?? (For most people it is not !.)

In that case the steps are --

First arrange the money ,

Then calculate 2% of that capital as your max Risk per trade.

Then take any trade you wish, based ofcourse on a trading plan. this trading plan would indicate the exit price for you if things go wrong.( Which happens very frequently ! )

Here comes the impt part. The qty that you trade now depends on your max Risk of 2% of your capital. Since qty traded is dependant on capital, the market that you trade ( cash or futures ) is also dependant only on this.

With this limitation, if you take a trade in futures and the probable loss considering the lot size , which is different for different scrips is still within your max Risk ( based on your capital ) , then by all means trade in futures because it surely costs less brokerage. Otherwise you have no option but to trade in Cash market.

Regards
gsri
Click to expand...
Thanks again for the reply gsri :)
LOL no its not that i have a lot of idle cash, its just that once in a while when you see long term opportunities you have to be ready to take it.
I am only learning at the moment. Doing paper trading. haven't invested or traded a single rupee yet. I am just learning to make sure that the models I am doing my paper trading on make sense in the real world.

And yes I am obsessed with brokerages because depending on the service you are using I think you lose anywhere between 1-2 % in brokerages & taxes itself every time you make a trade in the cash segment.
 
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