Futures trading offers opportunities not only for speculation but also for risk management and capital efficiency. While markets evolve, core futures strategies have remained effective across cycles when used with discipline.

This guide covers the most widely used, time-tested strategies in the futures market, along with practical examples referencing Indian indices, commodities, and major currency pairs.

Trend Following Strategy

“The trend is your friend, until it bends.”

This strategy aims to trade in the same direction as the prevailing trend, often using:

• Moving Averages (20/50/200 SMA)

• ADX for trend strength

• Price structure (Higher highs / Lower lows)

📌 Setups:
✔ Buy Nifty futures above a breakout of previous swing high
✔ Sell crude oil futures when price breaks key support with increasing volume

Example:
If Nifty 50 steadily trades above the 50-Day SMA with strong ADX → Bulls are in control → Long positions favored.

Where it fails:
Range-bound or highly volatile markets.

2️⃣ Breakout Trading Strategy

Used when price escapes consolidation and begins a new directional move.

Indicators:

• Support & Resistance levels

• Chart patterns (Triangles, Flags)

• Volume expansion confirmation

Example:
Gold futures breaking above a multi-week resistance with high volume → long entry.
Stop-loss just below the breakout zone.

Key rule: Avoid early entries before confirmation.

3️⃣ Spread Trading Strategy (Advanced but powerful)

Reduces directional risk by trading the price difference between two related futures contracts.

Types:

Pros:

• Lower margin requirement

• Reduced volatility risk

• Often used by professional traders and institutions

Hedging Strategy

Used by businesses, institutions, and sometimes traders to protect against price risk.

Examples in India:

• A jeweler hedges gold price risk with Gold MCX Futures

• Exporters hedge USD/INR fluctuations using currency futures

• Equity investors hedge a portfolio by shorting Nifty futures

Goal: Stabilize returns, not maximize profits.

5️⃣ Momentum Strategy

Momentum traders capitalize on strength becoming stronger over the short term.

Tools:

• RSI above 60 (bullish momentum)

• MACD crossovers

• High relative volume

Example:
If Bank Nifty shows sharp relative strength vs Nifty + bullish candle patterns → Long Bank Nifty futures for short-term momentum.

Risk: Momentum can reverse rapidly - tight stop-loss essential.

6️⃣ Mean Reversion Strategy

Markets often return to the average, especially in range-bound phases.

Indicators:

• Bollinger Bands

• RSI oversold/overbought markers

Example:
If silver futures hit the lower Bollinger Band with bullish reversal candle → Long targeting mid-band.

Works best in sideways markets - avoid during strong trends.

Bonus: News & Event-Driven Strategy

Used around:

• RBI policy announcements

• U.S. Fed decisions

• Crude oil inventory data

• GDP & inflation releases

• Election results

📌 Tip: Let volatility settle before entering trades.
Market reactions can be irrational immediately post-event.

Position Sizing & Risk Management: The Success Backbone

Regardless of strategy:
✔ Keep risk per trade 1–2% of capital
✔ Always use stop-loss orders
✔ Reduce leverage during high volatility
✔ Avoid over-trading and revenge trades

As professionals say:

“In futures trading, defense wins championships.”

---

Which Strategy Fits You?

Pick a strategy that matches your psychology, not someone else’s.

📌 Final Thoughts

Futures trading rewards discipline over excitement.
The best traders consistently apply simple strategies with:

• Proper risk controls

• Correct position sizing

• Emotion-free execution

Hedging, trend following, momentum trading, breakouts, spreads, and mean reversion continue to be reliable frameworks, as long as traders respect risk first.

As the saying goes:

Strategies don’t make traders profitable.
Risk management does.

**This article is for educational and informational purposes only and does not constitute investment advice or a recommendation. Futures trading involves a high level of risk. Readers should consult with a SEBI-registered financial advisor before making investment decisions.