Are you interested in derivatives trading but don’t know how to start and make money from it? Heckyl is the right place for beginners and experienced traders to kick start their trading in futures. We will explain you how you can spot profit making opportunities in real-time.
The internal market data is key to grab opportunities in futures. So first you need to monitor open interest (OI), price and volume of a stock or an index contract. Second, you need to understand and interpret this data to confirm price trend. Third, when you are sure of bullish or bearish price signals, you can initiate long or short strategy in the specific futures contract. Fourth and most important thing is a discipline approach for profitable trade.
Open interest is a total number of open contracts on a security. For each buyer of a futures contract there must be a seller. From the time the buyer or seller opens the contract until the counter-party closes it, that contract is considered ‘open’. A large open interest signals more activity and liquidity for the contract.
By monitoring the changes in the open interest, price and volume figures, one can draw important conclusions about the market activities, which can help in predicting the near-term price trend. Below table shows how one can read futures contract data.
|Long Built-up||Rising||Up||Strong/ Bullish|
|Short Built-up||Falling||Up||Weak/ Bearish|
|Long Unwinding||Falling||Down||Weak/ Bearish|
|Short Covering||Rising||Down||Strong/ Bullish|
However, monitoring and analyzing open interest, price and volume data for hundreds of contracts for stocks and indices in real time is a daunting task for an individual trader. Understanding this need, Heckyl has launched the 15-Minutes Built-up screen. This screen gives a snapshot every 15 minutes for the open interest and a breakup of fresh and square-off contracts along with price and volumes. There will be 25 intervals of 15 minutes each in a trading session, which opens at 9.15 am and closes at 3.30 pm.
Let us see, how the 15-Minutes Built-up screen will work for you.
Case Study: Bank of India
On 3rd June 2016, Bank of India, a public sector lender, witnessed a huge short built up indicating bearish outlook on the stock. Out of the 25 intervals, Bank of India recorded 16 short built-ups and 5 long built-ups.
In the below image, one can see how a large number of short built-ups in Bank of India have impacted the price negatively.
After seeing first three zones of short built-ups between 9.15 am to 10 am, a positional trader could have shorted the stock around Rs 86 immediately after 10 am. Subsequently, Bank of India stock fell continuously as short built-ups have dominated the day’s trade. Though the stock advanced briefly for few intervals on the back of long built-ups, it did not helped the stock from falling further. Finally, the stock settled below Rs 83 or 4.66 percent lower from the previous closing.
By using 15 minutes built up screen, one could have made profit by covering short position (which was initiated at Rs 86) around Rs 83, netting a profit of Rs 3 per unit, or Rs 9,000 on one lot of 3,000 units of underlying stock.
Similarly, one could also make profit by going long on stocks, which are witnessing strong long built-ups.
Case Study: Bajaj Finance
On June 2, 2016, Bajaj Finance has witnessed a strong long built up. The stock witnessed 15 long built-ups and 6 short built-ups. Bajaj Finance recorded a surge in price as long built ups have dominated the day’s trade.
A positional trader could have created a long position around 1.30 pm after noticing long built-ups for preceding four intervals. One could have made profit by initiating long position around Rs 7,690 and covering it around Rs 7,900, netting a profit of Rs 210 per unit, or Rs 26,250 on one lot of 125 units of underlying stock.
In the below image, one can see how a large number of long built-ups in Bajaj Finance have impacted the price positively.
15-Minutes Built-up is a powerful screen for traders. This screen not only helps in finding trading opportunities, but also helps in deciding when to exit or close position with profits. However, one must not forgot that the futures market is highly leveraged. A minor price change, could result in a huge profit or loss. So if you are new to the trading world, it is advisable to understand futures’ fundamentals and market dynamics first as there are no short cuts for becoming a successful trader.
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