How to use Index Futures to Forecast the Future?
The index futureswhich is traded in the Indian market is well-known as the Nifty.
The Indian stock market opens at 9.15 am and closes at 03.30 pm.
The nifty futures in the world market are, conversely, traded the full day.
It is traded in the diverse markets in the world.
CNX Nifty, as it is called, is a powerful sign for stock forecast.
It is possible to keep a track of the CNX Nifty before the stock market opens.
This can give you a clue as to where the stock market may open, whether it will gap up, gap down or open flat.
Before stock trading, brokers in general make it a routine of looking at the CNX Nifty in order to judge the opening of the market.
When you trade with the stock charts and do online trading, then you can presume the market open with the CNX nifty value and then make a rapid support or a resistance level in a smaller time frame chart for a swift trade in the morning market.
What is the difference between the value of nifty and the value of nifty futures?
There are a few differences between the value of nifty and the value of nifty futures. An adjustment is made to compare like with like. This is known as a fair value.
The fair value of the index is calculated as: FV = S * [1 + (I – D)] Where FV stands for the fair value, S stands for the current price of the index, I stands for the current rate of interest to buy the nifty components and D stands for the current dividend rate on the nifty components.
Index futures to forecast the open in the market
The index futures give a very clear intimation of what is happening to the CNX nifty in the world market and how the market should open today.
This allows you to take a quick entry and exit position in the market as well as book profits in case you have been carrying forward a trade from the previous day.
The index futures may not be the sole measure to trade on the market future but on the other hand it acts as a very dependable intimation in order to take trades in the morning. Conversely, during the rest of the day, you need to technically evaluate the Nifty in order to take intraday trading calls in Nifty futures.