Stock Market · Futures Trading

Risk management in futures

Futures are the fastest way to make money in the market. They're also the fastest way to lose everything. Most traders who blow up, blow up in F&O, not in stocks.

Why futures are dangerous

1. Leverage: 10–15× amplifies losses as viciously as gains

2. Binding obligation: you cannot just 'hold and wait' if the position goes against you. Margin calls will force you out

3. Daily MTM: losses are realised immediately, daily. No recovery time.

4. Expiry pressure: positions must be managed actively around expiry

> The 2020 COVID crash: Nifty fell 38% in 5 weeks. A 5× leveraged futures position = 190% loss. Capital wiped. Then some. Most leveraged traders were forced out at the bottom. Right before the recovery.

The non-negotiable rules

1. Never hold more than you can afford to lose entirely: treat futures margin as money you're willing to lose

2. Always have a stop-loss before entering: know your maximum loss per trade before you enter

3. Size your positions to risk: risk no more than 1–2% of capital per trade. For a ₹5 lakh account, that's ₹5,000–10,000 maximum loss per trade.

4. Never average down in futures: 'It'll come back' with leverage = wiped account before it comes back

5. No overnight positions without a plan: gaps on opening can bypass your stop-loss

6. Keep 30–40% of capital in liquid cash: margin calls require immediate cash

70-80%Retail F&O traders who lose money (SEBI study, 2023)

Takeaway. Futures amplify losses as fast as gains. Never trade without a stop-loss, risk no more than 1–2% per trade, never average down, and keep cash for margin calls. The market can stay irrational longer than you can stay solvent.